MarketWatch reports that General Electric Co.'s (NYSE: GE) General Electric Asset Management (GEAM) Trust Enhanced Cash Fund will offer investors the option to redeem holdings at 96 cents on the dollar. I wonder whether this will look like a relatively good deal when we look back on the problems that money market funds are likely to experience due to their exposure to asset-backed securities (ABSs).
The GEAM fund sustained losses due to mortgage-backed securities (MBS) investments and has already let institutional investors exit the fund. No word on the terms these investors received, but if they had other business dealings with GE, I would be very surprised if they got out below 96 cents on the dollar. Meanwhile, GE plans to withdraw $250 million of its own money from the fund.
As I posted yesterday, GEAM is far from the only money market fund in trouble due to investing in MBSs. One thing's clear -- those who get out first will be better off than the small fry that wait until the end to try to redeem their money from these uninsured funds.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns GE stock.
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Reader Comments (Page 1 of 1)
11-15-2007 @ 12:45PM
Todd'O said...
Question: are the large write-offs really representing actual valuation losses or are they being inflated by companies as a way to look "responsive" to investors or inappropriately reduce their tax risk?...Seems to me that these 'paper' losses are going to overly influence reduced tax revenues and further depress the economy by overstating the forthcoming drama (forecasts of massive layoffs, etc. for years to come).