NEW YORK, Nov 14 (Reuters) - A $5 billion money market fund run by General Electric Co’s (GE.N) asset management unit is offering investors an option to redeem their holdings at 96 cents on the dollar, Barron’s Online reported on Wednesday, becoming the latest casualty of turmoil in U.S. mortgage and credit markets.
The GEAM Trust Enhanced Trust fund’s assets primarily come from GE’s pension trust and other GE employee benefit plans, Barron’s said. In a Nov. 8 e-mail to institutional investors, GE Asset Management said “extreme conditions in the credit markets” are forcing the fund to sell securities at a loss, according to Barron’s.
It is extremely rare for money market mutual funds — which are designed to maintain a constant $1 per share net asset value but lack federal deposit insurance — to lose principal. In 1994, the $100 million Community Bankers U.S. Government Money Market Fund gave investors back just 94 cents on the dollar.
In recent weeks, Bank of America Corp (BAC.N), Legg Mason Inc (LM.N) and other fund sponsors stepped in to support money funds. Letting a money fund lose principal would likely damage a sponsor’s reputation and prompt investor withdrawals.
GE representatives were not available for immediate comment. (Reporting by Jonathan Stempel; Editing by Jeffrey Benkoe)