Reserve Primary: Fools Rush in Where Wise Men Fear to Tread!

Volume 13, Number 1, First Quarter 2015

Ozgur (Ozzy) Akay, Mark D. Griffiths and Drew B. Winters

This is a clinical analysis of the demise of the Reserve Primary Fund, the first ever money market fund. Reserve Primary was caught in a perfect storm of its own making when the financial markets went into a full-blown crisis mode with the bankruptcy of Lehman Brothers on September 15, 2008. However, if the fund’s management had not abandoned the core principles that had guided the fund for more than 30 years, then the Lehman bankruptcy would likely not have led to the closing and liquidation of the Reserve Primary Fund.