JPMorgan stems money fund losses JPMorgan Chase is to offer clients of its two large euro-denominated money market funds a way to address losses from investing in short-term bonds where interest rates have fallen sharply. The move comes as banks and other investors in cash instruments and short-term debt, to which money market funds allocate large sums, face rapidly diminishing and even negative returns after the European Central Bank's decision to cut rates on its deposit facility to zero. JPMorgan will add a new share class to its €13bn Euro Liquid Fund and its €4bn Government Liquidity fund that will allow investors, such as companies managing cash holdings, to continue using the funds if interest rates are negative. The ECB's decision in July to cut its deposit rate to zero forced the bank and some peers to restrict access to some funds in the €1.1tn market. JPMorgan last week reopened its funds to investment from existing clients, but they remain closed to new investors. Government money market funds now earn about 5 basis points annually, forcing sponsors to waive fees. Market prices suggest that there is only a 10 per cent chance that the ECB will push interest rates below zero this year and about a 20 per cent chance next year, according to Bob Deutsch, global head of JPMorgan's liquidity business. However, were the ECB to move to minus 25 basis points, he said "we think all the market rates will follow. That creates a conundrum, as funds aren't really built for negative yields. It's never happened before. Several sponsors have looked at ways to pass on losses, an issue which is complicated by the structure of the funds. Money market investors have historically prized the fixed share price of funds for accounting purposes, a structure that cannot accommodate losses. Funds of this type "breaking the buck" in the US contributed to the financial panic of 2008. JPMorgan says that it is the first to offer a solution within that structure. Its new share class will maintain an investor's holdings at a stable €1 share, but will deduct shares from their overall account to cover the cost. Investors would also have the alternative of using an existing "accumulating fund," one that gathers interest similar to a bank account, and from which costs could be deducted. However, the bank says that fewer than 20 per cent of its customers currently use this type of fund class. This system would also allow the bank to charge fees again, although Mr Deutsch said there was no intention to do this in the near term. The lengths to which fund sponsors are going to preserve the stable price of funds contrasts with regulators on both sides of the Atlantic, who would like to see prices float to reflect the potential for losses.