JPMorgan Chase & Co., Goldman Sachs Group Inc. and BlackRockInc. closed European money market funds to new investments afterthe European Central Bank lowered deposit rates to zero.

JPMorgan, the world's biggest provider of money-market funds,won't accept new cash in five euro-denominated money- market andliquidity funds because the rate cut may result in losses forinvestors, the company said in a notice to shareholders. GoldmanSachs won't accept new money in its GS Euro Government LiquidReserves Fund, and BlackRock, the world's largest asset manager, isrestricting deposits in two European funds.

“The European market environment is in unchartered territorywith such historically low — or even negative — yields forhigh-quality issuance,” Goldman Sachs said in a memo to fundshareholders, citing the ECB's rate cut. “It is not currentlyfeasible for our portfolio managers to deploy capital withoutsubstantially diluting the yield for the existing base ofshareholders.”

The ECB yesterday reduced its benchmark rate to a record low of0.75 percent and took its deposit rate to zero. Money funds havebeen struggling to invest client assets at a profit as interestrates globally are near record lows and Europe's sovereign debtcrisis has reduced the supply of available debt. Managers have beenforced to cut fees to keep customer returns above zero, and somehave abandoned the business.

All three firms said the restrictions are temporary and theywill monitor market conditions. Investor redemptions from the fundsare not being limited.

JPMorgan's five closed funds had 23.7 billion euros ($29.2billion) in assets as of July 5, the bank said in an e-mail, about22 percent of all euro-denominated money funds. The funds areJPMorgan's Euro Liquidity Fund, Euro Government Liquidity Fund,Euro Money Market Fund, Euro Liquid Market Fund and JPMorgan SeriesII Funds — EUR.

The deposit rate cut “will almost certainly move cash bids inshort-dated instruments into negative territory, and so we havetaken the step to restrict subscriptions and switches into thefunds in order to protect existing shareholders from yielddilution,” JPMorgan said on its website.

The company had $417 billion in money fund assets as of May 31,making it the world leader, according to Crane Data LLC, a researchfirm based in Westborough, Massachusetts. The entireeuro-denominated money fund industry has about 108 billion euros,Crane Data's statistics show.

BlackRock's Funds

No other global liquidity funds are at risk of being closed,“but we will not hesitate to restrict investments if we feel themarket environment warrants such action in order to protect theinterests of existing shareholders,” JPMorgan said on itswebsite.

BlackRock is restricting subscriptions into two funds in itsInstitutional Cash Series, the Institutional Euro Liquidity Fundand the Institutional Euro Government Liquidity Fund, JessicaGreaney, a spokeswoman for the firm, said in an e-mail.

“We're continuing to monitor the situation and evaluate optionsthat are consistent with the best interest of fund shareholders,”Greaney said.

Vanguard Group Inc., the world's largest mutual-fund firm,closed two money funds in 2009 and the funds have remained closed,spokesman John Woerth said in an e-mail. The two funds, VanguardAdmiral Treasury Money Market Fund and the Vanguard Federal MoneyMarket Fund, have about $18 billion in assets, according to datacompiled by Bloomberg.

The Valley Forge, Pennsylvania-based firm said at the time ofthe closing that the action was taken to protect existingshareholders. Vanguard has $1.8 trillion in U.S. mutual fundassets.

Fidelity Investments, based in Boston, restricted investments infour of its money market funds in December 2008. The funds werereopened in July 2010, spokesman Adam Banker said in an e-mail.

“We took those measures because we believed they were in theinterests of the funds' shareholders at the time,” Banker wrote.Boston-based Fidelity had $403 billion in money fund assets of May31, according to Crane Data.

The $2.5 trillion U.S. money fund industry has been wrestlingwith the impact of low interest rates since the Federal Reserve cutrates to near zero in December 2008.

Industrywide revenue fell from about $12.5 billion in 2008 to$4.7 billion in 2012, according to Crane Data. Yields that reached5 percent in 2007 today average about 0.06 percent, President PeterCrane, said in a telephone interview.

“Investors have lost hundreds of billions of dollars of interestincome,” Crane said. While industry profits have been squeezed,very few major players have left the business, Crane said.

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