MANHATTAN (CN) – The Primary Fund, a money market mutual fund, lost $785 million by its “disastrous and unreasonable” purchase of Lehman Bros. commercial paper, shareholders say in a federal class action. The Primary Fund, owned by co-defendant Reserve Fund Management Co., stopped redeeming its shares Tuesday, the day after Lehman Bros. filed for bankruptcy.
The fund said it had $23 billion in assets on Tuesday, down from $65 billion on Aug. 31, Reuters reported.
Plaintiffs say The Primary Fund violated Section 13(a) of the Investment Company Act and deviated from the “fundamental investment policy” in its Registration Statement, which was to “preserve capital.” The Fund did that in search of higher returns, the plaintiffs say.
Plaintiffs are represented by Lester Levy with Wolf Popper.