BofA moving cash group to Boston
Bank of America Corp. is relocating its locally based cash-investment group to Boston, where its new chief is based.
A spokesman for the bank says the unit's approximately 30 employees, currently based in the Interstate Tower in uptown Charlotte, can either keep their jobs and relocate or search for other opportunities within the company.
The move is expected to be finalized by the end of September.
The bank's Boston-based investment-management division, Columbia Management Group, hired Paul Quistberg this year from mutual-fund company Putnam Investments to lead the cash group. The unit has run into problems during the credit crunch, with a group of money-market funds it manages suffering losses.
Money-market funds are designed to give consumers and institutional investors a place to put their money and earn a higher return than a savings account but with minimal risk. The typically invest in low-risk securities such as Treasuries and commercial paper.
Money-market funds attempt to keep their shares stable at $1, with only the yield rising or falling. While it's rare, those shares may fall below $1, or "break the buck," if the fund's investments do poorly, and investors can lose money.
In November, Charlotte-based BofA (NYSE:BAC) announced it would set aside nearly $600 million to support a group of money-market funds that had purchased debt from structured investment vehicles, which have been hit hard by the credit crisis freecreditscore paydayloans. SIVs use borrowed money to invest in higher-yielding but riskier investments. As the value of the SIV securities fell, some Columbia cash funds were at risk of breaking the buck.
In its annual report, BofA said its cash funds typically invest in "high-quality, short-term investments" as well as a limited number of securities issued by SIVs. At the end of 2007, the bank had set aside $565 million for some of Columbia's cash funds in the event that their shares fell below certain thresholds. BofA also had taken losses of $382 million associated with that commitment. BofA had purchased SIV securities from the funds for $561 million and taken losses of $394 million on those investments.
Roughly half of the $565 million that was set aside was devoted to the Columbia Strategic Cash Portfolio, which BofA describes as an "enhanced cash fund" designed to provide wealthy individuals and institutions with a higher-yielding alternative to regular money-market funds. In December, the bank said it was shutting down the fund after investors pulled their money; the fund subsequently lost more than $20 billion in assets in a matter of days.
At the end of the first quarter, the cash group's assets under management stood at $176 billion, down from more than $200 billion in mid-2007.