U.S. Debt Fight Makes Some Money Fund PMs Squirm
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Thursday, July 28, 2011

U.S. Debt Fight Makes Some Money Fund PMs Squirm

The uncertainty in Washington over the nation's debt ceiling is causing large U.S. money market mutual fund managers to preps for redemptions, Reuters reports. However, not all fund shops are worried.

For example, Federated Investors Inc.[see profile] has reportedly decreased the average weighed maturity in its $19.1 billion Treasury Obligations government money fund to 34 days, from 41 days in mid-June. Deborah Cunningham, Federated executive vice-president, told the pub that: "We want to make sure our investors are comfortable, and if they need to divest their holdings we want to be able to do that for them. We don't expect that will be necessary."

JPMorgan Chase & Co[see profile] has also reportedly shortened maturities and boosted liquidity, and all its money market funds now have more than 30 percent of assets in overnight liquidity.

However, other players like Vanguard Group Inc.[see profile] aren't feeling the heat of the debt ceiling crisis just yet. David Glocke, manager of Vanguard's $112 billion Prime Money Market Fund, said in an interview that he does not expect the U.S. government to default and that he has been adding Treasuries to his fund's portfolio. Its weighed average maturity is 58 days, about where it has been since 2010.

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