The golfers kept losing their prize money. After all those subpar rounds, the winners on the Professional Golf Association tour would be handed checks for their prize money, put them in their pockets or golf bags, and promptly lose them. The PGA had to stop payment on so many checks worth thousands of dollars and issue new ones that it jumped at the opportunity from Merrill Lynch, Pierce, Fenner & Smith.
Merrill Lynch offered to help the PGA set up special accounts for the golfers in its Cash Management Account, the firm's versatile money market fund. Now, instead of giving the pro a sizable (and losable) check, the PGA deposits it directly into his Merrill Lynch CMA account, where it can begin earning interest. Over 100 golfers have the accounts.
For Merrill Lynch, the PGA deal provided another source of deposits for what is probably the fastest growing of the money market mutual funds. Since the CMA went into operation early in 1978, it has gained about $7.5 billion in assets.
And it has begun to gain something else: imitators.
"The cash management concept is the most revolutionary financial services product to come down the pike in a long time." That plaudit only soundsm like it comes from a Merrill Lynch brochure. It is actually from Jeffrey Lane, executive vice-president at Shearson Loeb Rhodes Inc. Later this year, Shearson will begin testing its version of the CMA and put it into operation in January.
Shearson is one of at least six firms testing, planning, or talking about some form of the CMA.
They cannot call it a Cash Management Account, however, since Merrill Lynch has already registered that name with the US Patent Office.
Whatever they call it, the account is very different from a typical money market fund that takes investors' money, purchases a variety of short-term government notes and bank securities, and pays interest rates currently running in the 15 to 17 percent range.
The CMA is basically a margin brokerage account. It provides a more efficient way for the broker and the investor to manage the account of a customer who wants to invest in stocks. The money in the account can be used to invest in different securities as the broker and investor see fit.