UPDATE 1-Reserve says its money funds seeking guarantees

BOSTON, Oct 9 (Reuters) - Reserve Management Co said on Thursday that 21 of its funds, including the Primary Fund that "broke the buck" last month and sparked a run on money-market funds, have applied to join the U.S. government program that guarantees investments.

Reserve's move comes after almost all leading U.S. asset managers, including Fidelity Investments, BlackRock Inc (BLK.N) and Vanguard Group, said they were seeking to join the guarantee program to reassure investors.

But it was not clear if the Primary Fund, which is now under liquidation, would get the government's backing. Reserve said on Sept. 16 the net asset value of the fund had fallen to $0.97 a share. The U.S. Treasury Department has said funds with a net asset value below $0.995 on Sept. 19 would not be eligible for the guarantee.

A Reserve spokeswoman did not return a call seeking comment.

Under the government's guarantee program, coverage will kick in if a participating fund's share value falls below $0.995. In exchange for the government coverage that would run for an initial three months, money-market fund managers must pay an upfront fee of up to 0.015 percent of net assets.

The Primary Fund said the net asset value of its shares "broke the buck," or fell below $1, because the bankruptcy filing of Lehman Brothers Holdings Inc (LEHMQ.PK) forced it to revalue the $785 million of Lehman securities it held as "zero."

It was the first time in 14 years a money-market fund, traditionally considered ultra-safe investments, had "broken the buck." The event triggered huge withdrawals not only from the fund, but also from the entire industry as investors fled.

They asked to redeem $60 billion from the $62 billion the Primary Fund, one of the industry's oldest and biggest money-market mutual funds, had before Lehman's collapse. The fund initially halted redemptions then unveiled a plan to liquidate its assets and distribute $20 billion in cash to investors.

"It's in a nether world right now," Peter Crane, president of research firm Crane Data LLC, said referring to the fund.

Reserve Management is also liquidating other funds. On Thursday, it said the trustees of the Reserve Municipal Money- Market Trust and three other trusts had decided to liquidate their assets. (Reporting by Muralikumar Anantharaman; Editing by Andre Grenon)