What does it mean when I hear that a money market fund “broke the dollar” (or “broke the buck”)?
If an adverse event—such as the downgrade or default of a portfolio security or a sudden sharp increase in short-term interest rates—pushes the market value of a fund’s portfolio below $0.9950 per share and the fund’s board decides to discontinue the use of the amortized cost method of valuation, the fund is said to “break the dollar,” or “break the buck.” When a fund breaks the dollar, shares are redeemed and investors are repaid at the fund’s NAV, calculated on the day investors place their redemption order. This has happened twice since the inception of money market funds. In 1994, a small institutional money fund broke the dollar; investors ultimately received 96 percent of their principal. On September 16, 2008, a money market fund announced that its NAV that day was 97 cents, due to a sharp write-down in some securities the fund held. That fund would later be liquidated. In September 2009, the SEC and the fund’s independent trustees estimated that investors would recover approxim
