To comply with changing international privacy requirements, ICI informs its visitors that we use cookies on our web site. ICI only uses cookies to allow subscribers and members to more easily use our site and to record site utilization. No personal or private information is gathered or stored. More details, including how to disable cookies, can be found on our privacy and cookie policy page. If you disable cookies, you will see this message on future visits to our site. Please click the enable button to consent to accepting cookies.
  • ICI Global
  • Independent Director's Council
Sign In  |  Forgot Password?
Advanced | Tips
  • Home
  • Policy Priorities
    • Fund Regulation
    • Retirement Security
    • Trading & Markets
    • Fund Governance
    • Taxes
    • ICI Comment Letters
  • Research & Statistics
    • Industry Research
    • Investor Research
    • Retirement Research
    • Statistics
  • Government Affairs
    • Financial Services
    • Retirement Security
    • Tax
    • Testimony
  • Industry Operations
    • Fund Accounting, Financial Reporting, and Valuation
    • Fund Distribution, Fund Clearance, and Settlement
    • Operations, Transfer Agent Servicing, and Recordkeeping
    • Portfolio Security Operations
    • Resource Centers
    • Technology, Business Continuity, and Information Security
  • News & Media
    • Media Contacts
    • News Releases
    • Blog: ICI Viewpoints
    • Speeches & Commentaries
    • Opinions & Responses
    • Videos
    • Podcasts
  • Publications & Resources
    • Resource Centers
    • Frequently Asked Questions
    • Fact Books
    • Research Publications
    • White Papers
    • Annual Reports
  • Events
    • ICI Events
    • ICI Global Events
    • IDC Events
    • Past Event Highlights
    • Sponsorship Opportunities
    • Event Contacts
  • About ICI
    • Mission & History
    • Board & Leadership
    • Membership
    • Annual Reports
    • ICI Education Foundation
    • Business Continuity
    • Careers
    • Contact Us
  • Resource Centers
  • Frequently Asked Questions
  • Fact Books
  • Research Publications
    • All Research Papers
    • ICI Research Perspective
    • ICI Global Research Perspective
    • ICI Research Reports
  • White Papers
  • Annual Reports

Home Publications & Resources Frequently Asked Questions

Print this page

Frequently Asked Questions About U.S. Takeover of Fannie Mae and Freddie Mac

How will the government’s takeover of Fannie Mae and Freddie Mac affect mutual fund shareholders?

Shareholders in money market funds and bond funds may benefit, because the Treasury Department’s action will make funds’ investments in the mortgage giants’ bonds and other debt securities more secure.

Shareholders in equity funds that own Fannie and Freddie stock could see further losses in their funds’ values. The Treasury Department’s plan puts existing holders of common and preferred shares first in line to absorb the companies’ business losses. Of course, mutual funds are generally highly diversified across a range of stocks. Therefore, declines in Fannie’s and Freddie’s stock could be offset if the government action builds confidence in the financial markets and other stocks gain in value.

Any decline in funds’ net asset value (NAV) is not likely to be precipitate. Funds adjust their NAV every day, and so any earlier declines in the price of Fannie and Freddie shares is already reflected in fund values.

How much of Fannie’s and Freddie’s debt was held by funds?

As of March 31, 2008 long-term mutual funds held about $370 billion in debt and mortgage pools issued by Fannie and Freddie, according to Morningstar data. Exchange-traded funds, closed-end funds, and unit investment trusts had additional, but much smaller, holdings.

Will the debt of Fannie and Freddie remain qualified for money market fund investments?

Yes, so long as the companies’ credit ratings are not reduced. That’s not likely. Even before the takeover, Fannie’s and Freddie’s paper was rated highly enough to qualify as investments for money market funds. And the government takeover should make the debt more secure, because it is now effectively backed by the credit of the U.S. government.

How much stock did mutual funds hold in Fannie and Freddie?

As of March 31, 2008 mutual funds held $27 billion in common and preferred stock in the two companies. That valuation is based on their prices at the time, when Fannie Mae common stock was trading at $26.32 a share and Freddie Mac common stock was priced at $25.32. The value of funds’ holdings has changed, of course, as the stock prices changed and as funds traded in and out of the stocks.

September 2008


top
  • About ICI
  • About IDC
  • About ICI Global
  • Privacy and Cookie Policy
  • Apply for User Account
  • Business Continuity
  • Contact ICI

Copyright © 2021 by the Investment Company Institute