Confidence in Fidelity money market funds

Counter to my disdain for Wall Street, I have a lot of confidence in Fidelity Investments in general, and in their money market funds in particular. I have a big (for me) pile of cash in the Fidelity Select Money Market fund (FSLXX), which is currently at the top of the heap for yield for retail money market mutual funds at 2.60%, as well as using the Fidelity Municipal Money Market fund (FTEXX) for my core cash at Fidelity. Even if they on occasion have modest exposure to the debt of companies in the news, they simply do a great job of managing risk and getting a decent return at the same time. And even if Net Asset Value (NAV) were to technically fall below $1.00, I have confidence that Fidelity has the resources to make good on a $1.00 NAV.

I have read all of the news reports on the Reserve Primary Fund and still do not quite fathom why there was such a huge run on that one fund. Their exposure to Lehman was only about 1.3% before the run started. That hardly seems to be the kind of exposure to cause 65% of assets to head for the exits. Of course, panics are never very rational. Still, there must be some very juicy story about rumors that caused such a massive, concentrated exodus.

One other twist that I know about: a lot of us paid estimated taxes on 9/15, so that had to be something of a factor in withdrawals on Monday.

I also read that TD Ameritrade customers may have an exposure to the Reserve fund. Maybe TD Ameritrade or similar organizations or some retirement fund managers might have made policy decisions for a broad class of retail customers that caused major withdrawals from the Reserve Primary Fund even without the individual investors doing anything at all. It just seems odd to me that a large number of investors would have made $40 billion in withdrawals so quickly (two days) from one fund, without news of the run in progress coming to light.

In any case, I am confident that with Fidelity this is not a very likely scenario.

-- Jack Krupansky