Columbia Management, a unit of Bank of America Corp., has closed its Strategic Cash Portfolio amid losses on asset-backed securities. According to the Wall Street Journal, the fund is currently valued at $12 billion, down from $40 billion just months ago. Bank of America closed this fund just weeks after announcing that it had set aside $600,000,000 to cover potential losses on its money market funds and an institutional cash management fund.
The Strategic Cash Portfolio, considered an enhanced money fund, was offered exclusively to high net worth individuals and institutional investors with at least $25 million or more. The enhanced fund was sold as an alternative to money-market funds, considered among the safest of all investments.
Investors, largely concerned with the crumbling subprime market, began pulling money out of the fund beginning in August 2007. Withdrawal requests continued until the fund was no longer able to sustain itself. Upon its closing, the fund’s share price was reported to be 99.4 cents on the dollar.
According to Bank of America, investors are left with two options. The largest investors will be redeemed “in kind”-given their share of the underlying securities in lieu of a cash payment. Smaller investors will be able to cash out at the 99.4 cents on the dollar current share price.
The Strategic Cash Portfolio is not the only enhanced money fund experiencing pressure from the continuing subprime crisis. Another enhanced money fund, the GEAM Trust Enhanced Cash Fund, managed by GE Asset Management, saw similar losses just a month ago due to investor concerns over the investments held by the fund. Investors in the GEAM fund were able redeem their position at 96 cents on the dollar.
Similarly, SEI, Wachovia/Evergreen Investments, Credit Suisse Asset Management, U.S. Bancorp/FAF Advisors, and Legg Mason separately announced that each had set aside funds or purchased losing investments from their funds to support their money market funds. Most have reported that such actions were necessitated by poor performing investments in special investment vehicles (“SIVs”).
If you are an investor in the Columbia Management Strategic Cash Portfolio, GEAM Trust Enhanced Cash Fund or a similar enhanced money fund, and have experienced significant investment losses, you may have legal claims to recoup your losses.