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Inter-Fund Lending Could Be Y2K Hedge


Several fund companies have recently sought inter-fund lending agreements that could serve as backups for any problems arising from Y2K computer problems.

Fund companies have broader concerns than just Y2K when establishing inter-fund lending programs, said Burton Greenwald, a consultant for mutual fund firms in Philadelphia. But, inter-fund lending programs ideally would be in place before the end of the year so that they can provide backup, if needed, he said.

American Century Mutual Funds of Kansas City, Mo. is one of the most recent companies to seek inter-fund lending, having filed with the SEC Nov. 16 to do so.

American Century's decision to file for inter-fund lending was not timed with Y2K in mind, said Chris Doyle, a company spokesperson. The company is following an established contingency plan designed to handle redemptions brought on by long-term market volatility, he said. American Century has already taken necessary Y2K protective measures, he said.

T. Rowe Price established its inter-fund lending program more than a year ago as an additional credit option, said Forrest Foss, associate counsel for T. Rowe Price. Foss said Y2K concerns were not a motivating factor for seeking the inter-fund lending but that any added support is helpful.

"It's consistent with the belt and suspenders approach we are taking toward Y2K," he said.

Federated Investors of Pittsburgh also filed for an inter-fund lending agreement five months ago and received SEC approval earlier this month. Rebecca Taylor, a spokesperson for Federated Investors, said Y2K was not a reason the company sought inter-fund lending, but that Y2K was on the company's mind and it welcomed a backup against any possible year-end problems.

But, if American Century finds it needs the inter-fund lending for backup, it may find it has filed to late, according to some industry lawyers, including Foss of T. Rowe Price. He said it took T. Rowe Price almost three months from the time it initially filed to secure SEC approval for its program.

There is not a set time limit for processing inter-fund lending requests, said John Heine, a spokesperson for the SEC.