Putnam to close money market fund

Putnam Investments today announced the shuttering of its institutional Putnam Prime Money Market Fund (PPMXX) as of 5 p.m. ET yesterday.

It’s the first time the Boston-based firm has had to close a money market fund.

Putnam Prime was offered to institutional clients with a minimum initial investment of $10 million.

As of Sept. 16, it had $12.3 billion in assets and the fund closed with a net asset value of $1 per share, but it was investors pulling out their money that led to the decision to shutter it, said Laura McNamara, Putnam spokeswoman.

“The fund experienced significant redemption pressure yesterday,” Ms. McNamara said. “Serious constraints on liquidity in money market instruments created the risk that in order to process redemptions the fund would realize losses in selling its portfolio securities.”

The problem stemmed from marketwide liquidity problems, she said.

The fund had no exposure to the securities of Lehman Brothers Holdings Inc. of New York, American International Group Inc. of New York or Washington Mutual Inc. of Tacoma, Wash.

Putnam and its trustees are working on a distribution plan, although it is not clear when that will be complete.

“We hope to provide shareholders with distributions as expeditiously as possible and will keep shareholders informed of our plans,” Ms. McNamara said.

The action does not affect Putnam’s other money market funds, such as the retail Putnam Money Market Fund and Putnam Variable Trust Money Market Fund, or its stable value funds.

Putnam had $163 billion in assets as of Aug. 31.