veggie, I would pull out, though I fear what they may do to NAV over 7 business days. From what I understand, Lehman paper is worth pennies on the dollar and some may be worth zero.
Being first out would be valuable if they were cashing out immediately. But, since they are not, management can see which redemptions are coming and price their assets accordingly, before even the first out receive anything.
Hanging on would make sense if some other institution coveted the mgt. fees and was willing to eat a small loss to obtain
the management contract. I don't see anyone likely to do this for the money funds, alone. But, if the deal is, buy the asset mgt. co. and take the money funds, too, as a package deal, it might be attractive to somebody who has access to the actual holdings as of right now. Lehman's asset mgt. business is highly regarded and it might be worthwhile to take the can of worms along with the solid company. I doubt it, but it might. I would bet the other way.
Now, a big "I told you so." For years, when somebody talked about money funds, I have recommended Treasury Only MFs. Not govts., because they had Fannies and Freddies. Prime 1 paper is great if you can trust the ratings agencies, but, you can't. Lehman was Prime 1 before they became Junkola. The difference in rates between treasuries and corporate debt was simply not worth the extra risk.
As it turns out, govt. funds will probably be o.k., as Fannie and Freddie are being bailed out. But we can't always count on that. |
