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BOSTON, Sept 18 (Reuters) - Bank of New York Mellon Corp (BK.N), a U.S. asset manager and custody bank, said on Thursday it has restructured an institutional cash fund to minimize losses to clients from holdings of Lehman Brothers assets.
The $22 billion BNY Mellon Institutional Cash Reserve Fund had seen losses from its holdings of Lehman, causing its net asset value to fall below the $1 a share par value to 99.1 cents.
Bank of New York Mellon said in a statement the fund, which has characteristics similar to a money market fund, has isolated the Lehman assets within the fund in a separate structure. It said the Lehman assets accounted for 1.13 percent of the fund.
Lehman Brothers Holdings Inc LEHMKQ.PKLEH.N, which filed for bankruptcy on Monday, is giving a huge headache to asset managers and their traditionally safe cash and money market funds.
On Tuesday, the New York-based Reserve Primary Fund, one of the oldest and biggest money-market funds, said its shares fell below the $1 a share threshold due to losses on Lehman debt. It was the first time since 1994 that a money market fund had dropped below the critical $1 a share level.
Some institutions have had to shore up their money-market funds to prevent their shares from falling below the $1 level — commonly known as ‘breaking the buck’.
Evergreen Investments said on Wednesday its parent Wachovia Corp WB.N will ‘support’ three Evergreen money market funds to prevent their shares from falling.
Many asset managers have come out with statements to reassure investors their cash is safe in the money-market funds. But many investors have rushed to the exits.
Boston-based Putnam Investments, a unit of Canada’s Great-West Lifeco (GWO.TO), said on Thursday it shut a $12.3 billion money market fund as it faced “significant redemption pressure” on Sept. 17.
Bank of New York Mellon shares slumped as much as 35 percent intra-day but then rallied to close down just 2.6 percent at $32.25 on the New York Stock Exchange. (Reporting by Muralikumar Anantharaman, editing by Leslie Gevirtz)