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'They Forgot What a Money Fund Was'

'They Forgot What a Money Fund Was'

When Bruce Bent created the first money market fund in 1970, the prevailing attitude was that any idiot could master cash management. But that was before some of the ultraconservative funds were caught with their hands in higher-yielding short-term securities that wound up part of the subprime mess. And with concerns about the impact of bond insurer downgrades on municipal money funds, investors are starting to concede that "only some idiots can run cash appropriately," Bent says. His company, The Reserve, manages some $90 billion. BusinessWeek's David Bogoslaw spoke with Bent about whether there are more surprises out there.

Is finding safe investments more of a challenge?There are securities out there with good collateral like certificates of deposit. We've got about $1.5 billion in tax-exempt muni funds. Ten percent of our assets were in Financial Guaranty Insurance and Mortgage Guaranty Insurance until October [the insurers were downgraded last November by Standard & Poor's Ratings Services]. We've run those down to about 5%.