A number of leading mutual and pension funds are invested in Lehman, Merrill Lynch and AIG and could suffer as a result, the Toledo Blade reports. How badly the shock to investors’ retirement savings will be, has yet to be sorted out, however.


“This is an extreme sort of event, and it will take days and months to figure out the precise consequences,” said Amiyatosh Purnanandam, an assistant finance professor at the University of Michigan.


Two of the largest fund firms to have exposure to Lehman as of June 30 are Fidelity and Vanguard, with respective exposures of 6% and 3%.

While Lehman stock is expected to drop to nothing, Merrill Lynch shares were exchanged for 0.8595 shares of acquirer Bank of America.


Some analysts believe the shakeout will be felt for months to come. John Carusone, president of the Bank Analysis Center, an investment banking consultancy, told the Stamford Advocate: “It’ll be the financial equivalent of Hurricane Ike for the next few months. If you invested in Lehman Brothers, then those portions of your investments will take it on the chin.”


Ciaran O’Hagan, a credit strategist at Societe Generale, had a dire outlook: “The losses look to be widespread, hurting the public through their mutual and pension funds. It’s clearly a disaster for public confidence.”

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