JPMorgan, Goldman Shut Europe Money Funds After ECB Cut [Bloomberg]
July 7, 2012 Leave a comment
JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money- market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.
“The European market environment is in unchartered territory with such historically low — or even negative — yields for high-quality issuance,” Goldman Sachs (GS) said in a memo to fund shareholders, citing the ECB’s rate cut. “It is not currently feasible for our portfolio managers to deploy capital without substantially diluting the yield for the existing base of shareholders.”
The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero. Money funds have been struggling to invest client assets at a profit asinterest rates globally are near record lows and Europe’s sovereign debt crisis has reduced the supply of available debt. Managers have been forced to cut fees to keep customer returns above zero, and some have abandoned the business.
All three firms said the restrictions are temporary and they will monitor market conditions. Investor redemptions from the funds are not being limited.