Investors in fallen money funds can't access cash

Reserve Management Corp. is liquidating its Primary Fund, where assets fell in value two weeks ago to 97 cents for each investor dollar put in. The New York-based firm said Monday night it expects to distribute cash on or about Oct. 13 to shareholders who are now facing losses of pennies on the dollar, based on shares held Sept. 15.

Brokerages such as TD Ameritrade Holding Corp. will pitch in a combined $118 million to recoup at least some of the losses for clients who had used the Primary Fund as a place to automatically park any idled cash in their brokerage accounts, and earn interest.

But investors in another smaller fund, Reserve Yield Plus, still have hundreds of millions that they can't take out, with no indication when or how much they'll get back from the $1 billion fund.

TD Ameritrade, which holds a majority of Yield Plus' shares, has not extended a loss-recovery pledge to Yield Plus shareholders as it has in the case of Primary Fund.

Yield Plus is a so-called "enhanced cash fund," which is similar to a money-market fund because it invests in short-term debt. But Yield Plus isn't technically a money fund because it operates under less-stringent investing and disclosure restrictions than the government sets for money funds.

However, some TD Ameritrade investors allege their brokers led them to believe Yield Plus was a money fund, offering quick access to cash when needed, and a safe haven in troubled times.

"All summer I had been gloating that we had been protecting our money from all the volatility, but lo and behold, we weren't," said Janet Hadingham, a 58-year-old freelance graphic artist from Wayland, Mass. She and her husband socked away $163,000 into Reserve Yield Plus last spring.

The money--the vast majority of the family's savings--was an inheritance from Hadingham's mother-in-law. Before putting it in Yield Plus, Hadingham had taken the cash out of mutual funds invested in stocks and bonds, which are normally riskier than the short-term government and corporate debt that money funds hold.

Money from Yield Plus hasn't been returned to investors within the normal seven days of customer requests for withdrawals, and Hadingham worries she won't be able to fully recover losses or even draw from the fund to cover her teenage daughter's tuition when she begins college next year.