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Alexis Leondis

You Can Trust Your Money Fund Not to Fail This Time

Sleep tight. A repeat of the 2008 financial crisis when the Reserve Primary Fund “broke the buck” should be of no concern. 

It’s not Lehman.

It’s not Lehman.

Photographer: Bloomberg

In recent history, when there have been tremors in the banking system, money-market funds have shuddered. People who had thought you put a dollar in, get a dollar out find that’s not necessarily the case. If anyone is worried this time around — as would be natural — they can rest a bit easier.

In 2008, the Reserve Primary Fund, a money-market fund, “broke the buck,” or had its net asset value fall below $1 due to its holdings of $785 million in commercial paper issued by Lehman Brothers. When Lehman collapsed, investors raced to withdraw money from the fund, and the fund was caught selling investments into a spiraling market. Panic selling at other money-market funds ensued.