TD Ameritrade, Putnam reassure fund investors

TD Ameritrade Holding Corp. told thousands of customers yesterday it will cover up to $50 million of losses in a fallen money-market fund, while clients of a Putnam Investments fund that suddenly closed last week were told their assets will be moved to another firm.

The moves came a week after the Reserve Primary Fund's underlying assets fell below $1 for each investor dollar put in. The extremely rare instance of a fund "breaking the buck" exposed investors to losses of pennies on the dollar, triggering fears that prompted the government to take emergency steps to prop up the more than $3 trillion money-market mutual fund industry.

TD Ameritrade said it expects to take a one-time charge of 5 cents per share against its fiscal fourth-quarter earnings to aid clients whose assets the brokerage firm was holding in its Primary Fund.

The $50 million represents the amount Ameritrade projects its brokerage clients could lose, based on the 97 cents-on-the dollar level that the fund's managers said assets stood at last week.

The Primary Fund's troubles - the first instance of a fund breaking the buck since 1994 - have led to several lawsuits in recent days against the fund's management firm, The Reserve Management Co., including a complaint from Ameriprise Financial Inc., a TD Ameritrade rival in the brokerage business.

Also yesterday, Boston-based Putnam Investments said it would transfer assets from a $12.3 billion fund that it closed last Thursday to a fund managed by Pittsburgh-based Federated Investors Inc.

Putnam said it would return money after institutional investors rapidly pulled money out, even though the fund didn't hold any debt of hard-hit financial firms such as Lehman Brothers.

Rather than rapidly sell assets at a loss, Putnam's trustees voted to shut the fund and distribute assets so all investors could still see a dollar-for-dollar return.

Yesterday, Putnam said it would liquidate the fund immediately and shift its assets to the Federated Prime Obligations Fund, giving shareholders one share each for each share they had owned in the Putnam fund, through an "in-kind purchase transaction."