Angry investors target Reserve's reserves

Investors who are still awaiting payouts from Reserve Management Co. Inc. — the New York-based firm whose $63 billion money market fund "broke the buck" last year — appear to be taking matters into their own hands. One institutional investor, the non-profit Electric Reliability Council of Texas Inc., has reached out to the Securities and Exchange Commission over its $47.8 million investment in The Reserve's Primary Fund, which in September became the first money market fund in more than a decade to expose investors to losses. Mike Grable, ERCOT's vice president and general counsel, noted that his Taylor, Texas-based utility council has received only about 85% of its money back since it attempted to redeem its investment from the fund in September. ERCOT officials penned a letter to the SEC last week asking regulators to take a closer look at The Reserve's plan for distributing the remaining assets in the Primary Fund, and it also protested a $3.5 billion "Special Reserve" that The Reserve has set up to cover damages and litigation costs the firm might incur. "We have asked the SEC to determine if this amount is fair and reasonable," Mr. Grable said in an interview, noting that the Special Reserve could erode future payouts to investors in the Primary Fund. Frank Bonanno, spokesman for The Reserve, could not be reached for comment. Thomas Smith Jr., the senior adviser at the SEC to whom ERCOT issued its protest, was also unavailable. Separately, Deutsche Bank AG's securities unit filed a lawsuit last week against The Reserve over its $500 million investment in the Primary fund. Deutsche of Frankfurt, Germany, stated that it has received only $428 million, or 85% of its initial investment, and the suit aims to recover the remaining $72 million, plus interest.