Bank of America's (BAC) Columbia asset management unit will shut down a large enhanced cash fund for institutional clients because of losses connected to the subprime collapse, the bank announced Monday. "Because of market conditions, we thought it best for the fund and its investors to unwind this particular investment vehicle over time," said Columbia spokesman Jon Goldstein. This is the largest enhanced cash fund -- meaning a fund that offers a higher yield than a money market fund by taking on more risk -- to fold so far during the crisis. Funds of this kind hold a collective $850 billion in assets. BAC's fund, called the Columbia Strategic Cash Portfolio, held $33 billion in assets at the end of November. 
$21 billion has been set aside for investors who have said they want out, and the remaining $12 billion will be wound down.
"This could be the death of enhanced cash funds," said Peter Crane, founder of Crane Data. "It is not going to affect you or me, but certainly in the enhanced cash space this likely signals the beginning of the end." Some investors will receive their money at the fund's current NAV, which is $0.994 on the dollar. Others might receive certain assets. Assets in money-market funds hit a record $3.083 trillion last week as investors fled to safety. BofA shares closed up 2.9% at $46.67.
Additional Reading: Let's Get Some Perspective on Subprime
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