Barclays Global Investors takes a hit on liquidity funds Thursday, August 07, 2008
Included in Barclays Bank results today was the news, highlighted by the FT, that profits before tax at Barclays Global Investors, the investment management business, fell 32 per cent to £265m, after charges of £196m, which the bank said were related to “selective support of liquidity products” to help clients.
This is a similar tale to that of firms like Legg Mason, who've wished to avoid "breaking the buck" on their money funds i.e. reporting a capital loss to investors. The support has normally taken the form of buying certain assets, usually illiquid ones, from the funds at above market value and absorbing the loss.
I've commented on this before here, here and here.
Will someone break ranks and admit that these are risky investments or will these funds continue to be "protected" by asset managers, in which case at what point will they be forced by regulators to capitalise accordingly?