Cash management fund is closed to some withdrawals

A bit more on that Bank of America cash management fund for institutional investors that I mentioned yesterday. It turns out things are a bit worse than Reuters reported. Not everyone will be able to cash out and even those who do will take a hit:

Columbia Management is shutting its Columbia Strategic Cash Portfolio, it told clients late last week, after facing major withdrawal requests from large investors. The fund, which held $34 billion at the end of November, has been split in two. Of the total, $21 billion has been put into accounts for the large investors who are seeking to cash out. An additional $12 billion remains in the fund, which will be wound down.

Columbia is a unit of Bank of America Corp., and Strategic Cash Portfolio was among its biggest products catering to institutional clients.

…Only some investors will be able to get their cash out. Several of the fund's biggest investors are being redeemed "in kind" -- that is, they have been given their share of the underlying securities, rather than a cash payment. Smaller shareholders can cash out at the fund's share price, which is currently 99.4 cents on the dollar. The fund required a minimum investment of $25 million.

Heaven only knows what the stuff they're going to distribute to the big guys will be worth.

[Of course, there could be some hidden shenanigans here. Maybe the stuff they're going to distribute to the big guys is worth more than $1.00, and this is a way to steal from the poor to give to the rich. You never know, but that seems unlikely.]