Keycorp has become the latest banking company to acknowledge propping up a money market mutual fund for losses on derivatives.
In the fall, the Cleveland banking company spent $2.5 million to cover derivative securities losses incurred by its Prime Obligations money market fund.
W. Christopher Maxwell, Keycorp's executive vice president of mutual funds, said the fund was never in jeopardy of "breaking the buck," or dropping below the traditional $1-per-share value. Rather, he said, Keycorp stepped in because it had repositioned the fund as a retail product and did not want it to hold derivatives.
The $2.5 million was immaterial to Keycorp, and so was not reported in its financial reports, he added. The move was disclosed in a sentence in the annual report for Keycorp's Victory Portfolios that was mailed out to fund shareholders in December.
A handful of other banking companies have made similar bailouts, including BankAmerica Corp., First Chicago Corp., and Northern Trust Corp.