GE sees no impact on results from fund redemptions
By Scott Malone and Svea Herbst-Bayliss
BOSTON (Reuters) - General Electric Co <GE.N> sees no impact on fourth quarter or full-year results after some outside investors liquidated their holdings in a fund operated by its money-management arm, a GE spokesman said on Thursday.
"This has no impact on operations," spokesman Russell Wilkerson said of the redemptions by about 10 outside investors.
The reiterated GE's forecast for profit of 67 cents to 69 cents per share for the fourth quarter and $2.19 to $2.22 per share for the year.
Analysts said the redemptions would be of little consequence for the company but would spark more worries about short-term funds, which are hugely popular and long considered safe.
The fund in question, the GEAM Trust Enhanced Cash Fund, now has about $5 billion in assets, down from $5.6 billion when GE gave outside investors a chance to cash in their investments at 96 cents on the dollar, Wilkerson said.
"You basically had $600 million of outside investor money go," he said. "So if you look at the loss associated with that, their loss, of 4 cents on the dollar, that brings you to about a $24 million loss. Across roughly 10 investors, that's about $2 million to $3 million loss per investor, depending on their holding."
Analysts said the news came at an awkward time, as investors are already fretting after several fund firms added their own money to prop up short-term funds.
"Why would GE let this happen? It is bad public relations and only creates angst and anxiety among people," independent mutual fund industry expert Geoff Bobroff said.
Legg Mason Inc <LM.N>, Wachovia Corp <WB.N> and Bank of America Corp <BAC.N> recently have shored up ailing money market portfolios with their own funds to prevent them from sliding below the dollar-per-dollar-invested level they promise to preserve.
Unlike those funds, GE's enhanced cash fund was available only to carefully screened institutional investors, not the general public. It makes riskier bets and does not promise to preserve what was invested.
Analysts said average investors are not likely to abandon the money-market investment segment yet.
"The evidence so far doesn't suggest that people are in a hurry to get out of these types of funds," said Peter Crane, who publishes Money Fund Intelligence.
GE's money-management arm, GE Asset Management, oversees the company's $60 billion in pension funds. Wilkerson said the GEAM fund in question does not hold collateralized debt obligations or structured investment vehicles. CDOs and SIVs are investment pools that invest in mortgages, which have fallen in value amid the credit crunch.
GE, the second-largest U.S. company by market valuation, behind Exxon Mobil Corp <XOM.N>, this month said it would raise the pensions of more than 130,000 retirees on December 1. Wilkerson said the conglomerate's pension fund is currently overfunded.
"All the different funds they have in order to support the pension are performing beautifully, and we have got a great track record," he said. "They're up over 13 percent this year."
The pension fund is handily beating its benchmark, which calls for an 8.5 percent return.
GE shares were down 39 cents, or 1 percent, at $38.62 in morning trade on the New York Stock Exchange.
So far this year, GE shares are up 4 percent, trailing the 6 percent rise in the Dow Jones industrial average <.DJI>, of which it is a component.
(Editing by John Wallace)