Report: Fidelity to Create Affiliate to Insure Money Funds
NEW YORK (AP) _ Fidelity Investments wants to create an affiliated insurance company that will guarantee its money market mutual funds against some but not all losses, The New York Times reported.
Fidelity has asked the federal Securities and Exchange Commission for permission to set up the insurance company with coverage up to $100 million but has not yet received approval, the Times said in Friday editions.
The plan would give Fidelity an edge over its competitors by assuring money market fund shareholders that their investments would be at least partially covered against loss if an issuer of a security owned by the funds were to default, the Times said.
But Fidelity said in its SEC application that it did not intend to use the insurance plan as a marketing tool.
Money market funds usually invest in short-term notes issued by the federal government or private companies. They are not insured, leaving investors with the possibility of losing some or all of their money if the investments go bad.
Fidelity Senior Vice President Robert C. Pozen said the company did not intend for the insurance program to guarantee its money market funds against all losses.
The insurance, for example, would not cover losses from normal market risks such as swings in interest rates.