Microsofties: Fidelity MM Fund has exposure to CDOs

edited August 2007 in The Economy
Subprime Infects $300 Billion of Money Market Funds, Hikes Risk
The Fidelity Institutional Money Market Portfolio had 2.3 percent of its $32.3 billion in assets in such commercial paper. Boston-based Fidelity fund manager Kim Miller says he's holding off on buying more CDO debt.

So now what am I supposed to do. Stock markets is going down, don't want to invest there. The bond funds buy some mortgage backed securities. Money market has exposure to CDOs. This sucks, I really don't want to be a bag holder.

Comments

  • I'm not sure if this is the right answer, but I just diversified - putting half in a FDIC insured 8 mo CD that WAMU is offering at 5.4 APY, and left the other half in a short-term MM, making sure the levels of each were under 100K.

    I feel safest in stocks right now, ironically. My mortgage company shorts in particular.
  • biliruben wrote:
    I'm not sure if this is the right answer, but I just diversified

    Unfortunately, people with 401K plans are stuck with a limited set of options. Microsoft employees can't move their 401K money to CDs or short positions.

    About the only other option for people stuck with captive 401K plans is to stop contributing and put the money in better investment alternatives.
  • perfectfire - If I were you I wouldnt start freaking out over your MM fund having 2.3% of its assets in CDO debt. Afterall it doesnt mention that its subprime debt and most MM funds require at least a BBB+ rating or higher on all investments (which were mispriced).

    The main people who are screwed are funds that used leverage, as a loss of 10% to 20% (or whatever %) in a subprime fund normally wouldnt be tragic, yet when you use 4:1 leverage it can cause some issues, lol.

    You probably benefited over the past several years from having the CDO debt in your account due to its higher return, thus it might go down a few points that would cancel out your larger prior year gains...
  • sniglet wrote:
    biliruben wrote:
    I'm not sure if this is the right answer, but I just diversified

    Unfortunately, people with 401K plans are stuck with a limited set of options. Microsoft employees can't move their 401K money to CDs or short positions.

    About the only other option for people stuck with captive 401K plans is to stop contributing and put the money in better investment alternatives.

    Unfortunately, you lose the matching funds from MS if you do that. Major suckage.
  • Nude wrote:
    Unfortunately, you lose the matching funds from MS if you do that. Major suckage.

    Well, the thought that allows me to keep sleeping at night is the realization that an outright loss of principal in the SAFEST investment fund allowed in a corporate 401K plan would likely result in such an employee revolt that the company management would likely feel compelled to make good on whatever losses there happened to be. In other words, your employer will act as a kind of deposit insurance entity.

    After all, it will be your employer's fault for not even giving you the OPTION to put your money in something safe (like T-bills). Don't forget that employers choose which funds to make available to their employee 401K plans.
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