--J.P. Morgan isn't allowing investors in five of its funds
--Goldman Sachs Asset Management isn't accepting subscriptions
in its GS Euro Government Liquidity Reserves Fund
--BlackRock placed subscription restrictions on two of its
funds
J.P. Morgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS)
and BlackRock Inc. (BLK) are closing several European money-market
funds to new investment after the European Central Bank slashed
deposit rates to zero.
These funds and others have struggled to provide returns to
investors since central banks in Europe, the U.S. and Japan cut
interest rates to near zero during the recent financial crisis.
The ECB has held rates slightly above those of the Federal
Reserve and Bank of Japan, but the deposit-rate cut and a
25-basis-point reduction in its benchmark lending rate Thursday
signaled that the days of European funds enjoying slightly higher
yields may be ending.
By closing the funds to new investment, the fund managers are
protecting their current investors by not dividing the meager
returns earned among more stakeholders.
J.P. Morgan, which has the largest euro-denominated funds, isn't
allowing new investors in five of its funds.
"We made the decision to impose temporary restrictions on our
euro-denominated money market funds because we think it will help
prevent further dilution in yields, which is in the best interest
of our clients," a company spokeswoman said in an emailed statement
Friday.
There are no restrictions on redemptions or switches out of the
funds, the bank said on its website.
Of the total $137 billion in euro-denominated money market
funds, J.P. Morgan manages about $30 billion, BlackRock manages
about $23 billion and Goldman Sachs manages about $13 billion,
according to Peter Crane, president of Crane Data.
Goldman Sachs Asset Management isn't accepting subscriptions in
its GS Euro Government Liquidity Reserves Fund effective
immediately, but redemptions aren't affected. A second euro fund,
the GS Euro Liquid Reserves Fund, wasn't closed to investors.
The ECB rate cut means "it is not currently feasible for our
portfolio managers to deploy capital without substantially diluting
the yield for the existing base of shareholders, since new inflows
would have to be invested in securities issued at extremely low or
negative yields," the company said in a memo to its clients.
BlackRock has placed similar subscription restrictions for two
of its funds: the Institutional Cash Series -- Institutional Euro
Liquidity Fund and Institutional Cash Series -- Institutional Euro
Government Liquidity Fund.
"We're continuing to monitor the situation and evaluate options
that are consistent with the best interest of fund shareholders,"
company spokeswoman Jessica Greaney wrote in an email. "In some
cases intermittent subscriptions may be considered."
European funds were yielding 0.14% as of Thursday, according to
Peter Crane, president of Crane Data. It would take about a month
for the cut in ECB rates to bring down yields even further.
By contrast, U.S. money-market funds are yielding, on average,
0.06%, Mr. Crane said.
"Investors in Europe wanted to get into the funds because the
funds were yielding more than the market," he said.
Now, they may have to find other avenues for investment.
Other companies that have euro-denominated money-market funds
include BNP Paribas SA (BNP.FR, BNPQY), Bank of New York Mellon
Corp. (BK), Bank of America Corp. (BAC), Federated Investors Inc.
(FII), Deutsche Bank AG (DB, DBK.XE), HSBC Holdings PLC (HBC,
HSBA.LN, 0005.HK), Invesco Ltd. (IVZ), Morgan Stanley (MS) and
Royal Bank of Scotland Group PLC (RBS, RBS.LN), Mr. Crane said.
Write to Anusha Shrivastava at anusha.shrivastava@wsj.com