Northern Trust to aid funds exposed to SIVs
BOSTON (Reuters) - Northern Trust Corp <NTRS.O> became the latest money manager to aid ailing short-term funds when it said on Friday it earmarked as much as $229 million for eight funds that are exposed to troubled structured investment vehicles (SIVs).
Northern Trust, which also offers private banking and global custody services in addition to investment management, said it will use its own money to keep clients from losing their money in funds that suffered losses due to soured SIV investments. Traditionally in short-term funds, investors expect to get their money back and if funds' losses are too severe, managers have stepped in to make their clients whole.
The Chicago-based company said it will take a "nominal" noncash charge of as much as $229 million to pay for the matter.
Northern Trust "entered into the Capital Support Agreements in order to provide stability to the Funds and investors in the Funds," the company wrote in a regulatory filing on Friday.
Investors reacted to the news by sending Northern Trust's stock down as much as 4.87 percent. It pared losses to 1.8 percent, or $1.30, to $70.10 on Nasdaq shortly before the close.
But analysts also praised Northern Trust for moving quickly, saying its decision should help protect its reputation in the market over the long run.
Northern's eight affected funds included the $40.9 billion NTGI Collective Short Term Investment. They all had investments in Whistlejacket Capital LLC and White Pine Finance LLC, which merged last summer.
Ratings agency Moody's Investors Service this week downgraded $7 billion of Whistlejacket's debt after its parent, Standard Chartered PLC <STAN.L>, dropped a plan to restructure the ailing SIV.
Like many other SIVs, these got into trouble as their assets fell at the same time as funding dried up. Since the summer many SIVs have required bailouts or defaulted.
Money managers Legg Mason <LM.N> and Janus Capital Group Inc <JNS.N> have previously promised to help their short-term funds whose SIV investments soured.
Also Citigroup <C.N>, Dresdner Bank, a unit of the Allianz Group <ALVG.DE>, and several other banks have said they would support their SIVs.
(Reporting by Svea Herbst-Bayliss; Editing by Richard Chang)