Northern Trust shutting fund in latest prime money market stress

BOSTON (Reuters) – Northern Trust Corp (NTRS.O) mentioned it should liquidate a $1.eight billion prime cash market fund, one among a quantity to return below stress this yr as traders withdraw money.

In filings on Monday Northern Trust of Chicago mentioned its fund board decided to liquidate and terminate its Prime Obligations Portfolio (NPAXX.O) round July 10, and return cash to shareholders, with the motion being of their “best interests.”

The fund’s supervisor in March had disclosed its liquidity degree dipped quickly, however Northern Trust didn’t give a extra particular purpose for the most recent steps. A spokesman for the Chicago asset supervisor didn’t instantly return messages in search of remark.

Bloomberg beforehand reported Northern Trust’s motion.

Like rivals, the prime fund owns a spread of presidency, financial institution and business devices to create a car with cash-like options however larger yields than government-only portfolios.

However the sector has come below strain within the ongoing financial disaster stemming from the COVID-19 pandemic, prompting Federal Reserve help.

Other fund corporations together with Vanguard Group Inc, Fidelity Investments and Goldman Sachs Group Inc (GS.N) even have taken steps like injecting money into their cash funds or closed them to new traders with a purpose to shield the returns of present shareholders.

In a notice to shoppers on Wednesday analyst Brian Reynolds of Reynolds Strategy LLC wrote that Northern Trust managers took the precise steps and that the motion is a “not a crisis situation” the place the fund ‘broke the buck,’ that means its web asset worth didn’t fall beneath $1 per share.

But Reynolds added that “it is likely going to be more difficult to obtain liquidity as this year goes on, and that is likely to lead to at least a sharp correction in stocks once the current bounce in equity prices has run its course.”

Reporting by Ross Kerber in Boston; Editing by Andrea Ricci


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