Wednesday's WSJ features a tale of risky investing that led to the the downfall of the Reserve. Co-authors Diya Gullapalli and Shefali Anand chronicle Bruce Bent's foray into risker and riskier investments as he publicly chastised proprietors of other money market funds for doing the same. Gullapalli and Anand write that in July of this year, Bent told the Primary Fund's shareholders that that the fund had "unwavering discipline focused on protecting your principal," while he was increasing holdings in riskier commercial paper. By May of this year, the fund had increased its holdings of commercial paper by 0.9 percent.

Assets at the Reserve have fallen to $8.5 billion as of Monday, according to iMoneyNet Inc., down from nearly $86 billion at the beginning of the month.

The story has one juicy detail reminiscent of Kate Kelly's expose of Jimmy Cayne in the Journal last fall: the elder Bent was vacationing in Italy when crisis struck his firm. He returned to work on September 18.

The Reserve announced on September 16 that the Primary Fund had broken the buck (see The MFWire, September 17, 2008).  

Edited by: Erin Kello


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