JPMorgan Chase & Co., the biggest U.S. bank, closed five of its European money-market funds to new investments after the European Central Bank lowered deposit rates to zero.
JPMorgan notified clients yesterday that it won't accept new investors or money in five euro-denominated money-market and liquidity funds because the rate cut might generate negative returns for investors, the New York-based company said in a notice to shareholders.
The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero, with President Mario Draghi saying the cuts may have only a “muted” economic impact.
The deposit rate cut “will almost certainly move cash bids in short-dated instruments into negative territory, and so we have taken the step to restrict subscriptions and switches into the funds in order to protect existing shareholders from yield dilution,” the company said on its website.
The restrictions are temporary, said Kristen Chambers, a spokeswoman for JPMorgan's asset-management division, which manages the funds. It will still process redemptions or transfers out of the funds and will periodically review whether to accept new money, the company said.
The funds affected are JPMorgan's Euro Liquidity Fund, Euro Government Liquidity Fund, Euro Money Market Fund, Euro Liquid Market Fund and JPMorgan Series II Funds — EUR.
No other global liquidity funds are at risk of being closed, “but we will not hesitate to restrict investments if we feel the market environment warrants such action in order to protect the interests of existing shareholders,” JPMorgan said on its website.
Bloomberg News
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