Charles Schwab is successfully selling off $8 billion in potentially risky structured investment vehicles (SIVs) that it held in six money market funds, according to a research report from
Currently, Schwab’s money market funds hold about 4% of their assets in SIVs, down from $115 billion, or 7%, at the end of September. And even though Schwab is rapidly selling these holdings, that should not cause investor panic or its remaining SIV holdings to fall drastically in value, Bernstein added. By the end of the year, SIV holdings in Schwab money market funds should be only 3.5%, and by the end of February, only 2%, according to Bernstein’s projections, based on the SIVs’ maturity dates.
“Like other large mutual fund complexes, Schwab is unlikely to ever allow its funds to drop below a dollar and would, if necessary, step in to buy the SIV commercial paper at par,” said Bernstein Analyst Brad Hintz.
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