Henry Brown, helped launch money market fund industry

WASHINGTON - Henry B.R. "Harry" Brown, a New York investment banker credited with helping launch the money market fund industry, which revolutionized how millions of people save and invest money, has died. He was 82.

Mr. Brown, a Leesburg, Va., resident, died Aug. 11 at Inova Loudoun Hospital of an abdominal aneurysm.

Money market funds are structured like other mutual funds, allowing thousands of investors to pool their money and buy shares of a diversified portfolio. Mr. Brown's Reserve Fund, which won Securities and Exchange Commission approval in late 1972, was the first money market fund in the United States.

With the Reserve Fund, Mr. Brown and a younger colleague, Bruce Bent, challenged what they considered an unfair juxtaposition in rates of return offered to small and large savers.

The fee to open an account with the Reserve Fund was $1,000 and allowed smaller investors to invest in short-term instruments such as Treasury bills, certificates of deposit, and commercial paper for the first time. Aided by a flattering article in the New York Times, Mr. Brown and Bent attracted $500 million in investors' funds by the next year.

Money market funds proved an easy point of entry into the investment world. Many of those who began to dabble in money markets later put their earnings into the stock and bond markets.

"Money market funds were clearly the most important product innovation in the history of the mutual fund industry," Matthew P. Fink writes in his forthcoming history of the mutual fund industry, "The Rise of Mutual Funds: An Insider's View."

Fink, a former president of the Investment Company Institute, an association of the US mutual fund industry, said in an interview that the popularity of money market funds forced the government to eliminate the restriction on how much interest banks and S&Ls could pay to holders of savings accounts.

Within weeks, the Reserve Fund had steep competition. Now a $3.4 trillion industry, money market funds are offered by banks, brokerage houses, and conventional mutual fund groups.

The Reserve Fund, which Mr. Brown left as chairman in 1999, manages $130 billion of investments - sizable but dwarfed by giants such as Fidelity and Vanguard.

The enormous popularity of such funds began to drain money from banks and S&Ls, but Mr. Brown said he felt little guilt.

"The banks can't accuse us of stealing their money," he told Forbes magazine in 1985. We "just recirculated it in bigger bunches. They had tremendous margins to play with, they were getting money at 5 1/4 percent and they could lend it out at 10 percent or better.

"With the average banker," he added, "the doorknob would hit him in the tail at 3 p.m. and then the only place you could find him was the golf course."

Henry Bedinger Rust Brown was born Feb. 13, 1926, in Pittsburgh, where his father was chief financial officer of the Koppers building materials company. He was a 1947 graduate of Harvard University, where he drew cartoons for Harvard Lampoon magazine.