Legg Mason, a US asset manager, has obtained a letter of credit (L/C) worth US$150 million to support a cash fund's holding in the UK-based structured investment vehicle Cheyne Finance.

Last year Legg Mason said it had procured US$238 million in L/Cs to support the credit ratings of two other money market funds. (DC World News, 5 December 2007).

Assurances

The L/Cs are meant to assure investors that their investments and the asset management firm itself are safe and secure amidst the current turmoil in the credit markets.

The move increases Legg Mason's support for its money market funds to more than US$1.5 billion.

Losses on investments

Officials at Legg Mason declined to reveal the size of the fund's holding in Cheyne Finance.

Legg Mason has obtained its latest L/C from an unnamed bank to cover the holding, and the fund manager can withdraw assets under certain circumstances, such as if the fund realises a loss on the investment. The agreement will last a year.

Taking precautions

Exposure to risky structured investment vehicles has affected a range of money market funds.

Northern Trust, Bank of America, Wachovia, Credit Suisse Asset Management, Janus Capital and Morgan Stanley Investment Management are amongst asset managers to have arranged lines of credit or taken other measures related to their money market funds.

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