(Adds SEC, Janus comments; background in paragraphs 6-10)
WASHINGTON, Feb 14 (Reuters) - The chairman of the U.S. Securities and Exchange Commission said on Thursday that the agency is not aware of any money market fund threatened with having to re-price below $1 a share.
“While we have seen some instances of funds requiring infusions of capital from the corporate parents of fund advisers, we are not aware of any money market fund that is threatened with having to re-price below $1,” SEC Chairman Christopher Cox told a Senate Banking Committee hearing.
Cox said the SEC has been working with the managers of money market funds as they cope with the downgrading of ratings and declines in the value of securities in which their funds have invested.
Money market funds are normally considered very safe short-term investments but several of them have come under pressure over the past few months because of the credit crisis and their exposure to securities related to subprime mortgages.
On Wednesday, U.S. asset manager Legg Mason Inc LM.N denied market rumors that one of its money market funds had fallen below $1 per share in net asset value, commonly known as "breaking the buck."
Janus said its money market funds were never in danger of breaking the buck.
“We are also concerned about the potential impact of downgrades of securities held by municipal money market and other funds,” Erik Sirri, the SEC’s head of trading and markets, said in prepared testimony for a House hearing on the bond insurance industry.
Money market funds are generally limited to investing in a diversified portfolio of high quality, short-term dollar denominated instruments.
Investors have been flocking to money market funds over the past year to escape volatile equity markets. Assets in U.S. money market funds stood at $3.12 trillion as of the end of December against $2.35 trillion a year earlier, according to fund industry trade group, the Investment Company Institute.
The last time a money fund broke the buck was in 1994, when a fund was liquidated at 96 cents on the dollar.
“Only one fund, and that of very modest size, has ever broken the buck since the development of money market funds in the 1970s,” Cox said. (Reporting by Rachelle Younglai; Editing by Steve Orlofsky and Tim Dobbyn)
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