Reserve To Pay Out Most Of Primary Fund's Remaining Assets
January 28 2010 - 2:39PM
Dow Jones News
Reserve Management said it will return most of the cash
remaining in its troubled Primary Fund to investors on or about
Friday.
The New York-based asset manager said Tuesday it will return
$3.4 billion to investors in the once-$63 billion Primary Fund. The
fund lost some of its value on Sept. 16, 2008 after the collapse of
Lehman Brothers Holdings Inc., sparking panic across the
money-market fund industry.
The distribution will be supervised by the U.S. District Court
for the Southern District of New York.
After the distribution, which will be the sixth from the Primary
Fund, 99% of its assets as of the close of business on Sept. 15,
2008, will have been distributed, the company said in a statement
on its website. About $160 million will remain in the fund to cover
management fees and other expenses to the extent such amounts are
approved by the court, the company said. That excludes the fund's
stake in Lehman Brothers' securities, once valued at $785 million,
but now carried at zero.
Robert Skinner, an attorney with Boston law firm Ropes &
Gray, who represents Ameriprise Financial Inc. (AMP) and its
clients in a lawsuit against Reserve Management, said Ameriprise is
pleased that the court's order has prevented the distribution from
taking any longer.
"It's very disappointing that it took 16 months and the court's
involvement in order to make this happen when the Reserve itself
could have chosen to bring about this outcome many, many months
ago," he said.
Reserve Management did not return a call seeking comment.
The Primary Fund's independent trustees had no comment on the
distribution.
In a statement earlier this month, Reserve Management said that
the court will review claims by the fund's adviser and distributor
for management fees and expenses to determine the amount payable
for such expenses out of the fund's assets. A complete statement of
the fund's expenses can't be provided until that review is
complete, it said.
As of Jan. 19, the adviser listed accrued fund expenses of more
than $17.3 million, including $15.1 million in management fees,
about $1.5 million in 12b-1 fees and $682,801 in trustees' fees,
trustees' counsel fees and fees and expenses of the fund's chief
compliance officer.
Skinner said the court continues to review the claims for fees
and expenses and that parties are submitting briefs. "It seems hard
to justify to shareholders a management fee for a fund adviser that
held investors' money hostage for 16 months," he said.
-By Daisy Maxey, Dow Jones Newswires; 212 416 2237;
daisy.maxey@dowjones.com
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