Putnam Investments Closes a Big Money-Market Fund

U.S. asset manager Putnam Investments said on Thursday that it had closed its $15 billionPrime Money Market Fund due to redemption pressures.

Putnam, a unit of Canada's Great-West Lifeco, said in a statement that the board of trustees of its funds had voted to close the institutional money market fund as it faced "significant redemption pressure" on Sept. 17.

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"The trustees' action was not related to the portfolio's credit quality, but was instead a reaction to marketwide liquidity issues," the fund company said.

The normally rock-solid reputation of money funds—which typically invest in short-term debt such as government and corporate bonds— took a major hit Tuesday when the value of Primary Fund RFIXX shares fell below the $1 benchmark for the funds.

The phenomenon, generally known as "breaking the buck," means that holders in that fund actually lose money.

Though most money funds are insured against such losses, not all of them are. Troubles at Primary Fund, which sustained some $40 billion in withdrawals since Friday, sent some investors scurrying for cover that their supposedly safe investments were in peril.

"You've got some people that are freaked out now," says Dennis J. Barba, managing partner of the Oxford Group of Raymond James Associates in Cleveland. "It's a crisis in confidence that could lead to worse things happening."

—Reuters contributed to this report