Money has rushed back into prime funds since the sector suffered
major withdrawals in March, according to figures from researcher
Peter Crane. Total prime fund assets stand at $1.1 trillion,
with less than $1 billion of net customer withdrawals for the
year to date.
One fund that has not seemed to benefit from the comeback is
Northern Trust's <NTRS.O> Prime Obligations Fund <NPAXX.O> which
recently had close to $4 billion in assets.
In filings on Monday, the company said its fund board determined
to liquidate and terminate Prime Obligations around July 10, and
return money to shareholders, with the action being in their
"best interests."
The fund's manager in March had disclosed its liquidity level
dipped temporarily.[nL1N2BG19H] Asked about the liquidation,
Northern Trust spokesman Doug Holt said "this decision was
specific" to the fund.
Prime funds own a range of government, bank and commercial
instruments. Other firms have injected cash into their prime
funds or closed them to new investors, and the sector has
received Federal Reserve support. [nFWN2C414W]
Crane said Northern Trust's actions seem unique given the fund's
small scale and the broader industry comeback. A bigger issue
could be low interest rates that lead firms to waive fees, he
said.
Analyst Brian Reynolds of Reynolds Strategy LLC said more funds
could liquidate if efforts to stimulate the economy don't
succeed.
"The risk over the rest of the year is that more funds start to
see redemptions as clients burn through cash that they just
borrowed," he said.
(Reporting by Ross Kerber in Boston; Editing by Megan Davies,
Andrea Ricci and Nick Zieminski)
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