Bank of America to Wind Down $12 Billion Cash Fund

Bank of America to Wind Down $12 Billion Cash Fund

Dec. 10 (Bloomberg) -- Bank of America Corp., the second- largest U.S. bank, froze a $12 billion enhanced cash fund after losses on holdings that included short-term debt sold by structured investment vehicles.

The Columbia Strategic Cash Portfolio was closed last week and is being ``wound down,'' Robert Stickler, a spokesman for the Charlotte, North Carolina-based bank, said today in an interview. The net asset value of the fund, which had $33 billion two weeks ago, was 99.4 cents on the dollar as of today, Stickler said.

Enhanced cash funds, which hold about $850 billion in assets in the U.S., are sold to wealthy individuals and institutions as an alternative to money-market funds. They offer higher yields than money funds by buying riskier assets such as mortgage-backed securities.

The Columbia fund had been the biggest of its kind, according to Peter Crane, founder of Crane Data LLC, the Westborough, Massachusetts-based publisher of the Money Fund Intelligence. ``This could be the death of enhanced cash funds,'' he said.

Pittsburgh-based Federated Investors Inc., the third largest manager of money funds in the U.S., last month bailed out investors in its Enhanced Cash fund as the credit markets seized up. GEAM Trust Enhanced Cash Trust, run by the asset-management unit of Fairfield, Connecticut-based General Electric Co., returned $600 million to investors at 96 cents on the dollar last month after losing $225 million, mostly in mortgage-backed securities.

Bank of America's decision to freeze the fund was reported earlier today by CNBC.

BLOOMBERG