Ultra short bond fund lawsuits are not the only concern for Schwab
Following the recent collapse of Schwab YieldPlus and several other ultra-short bond funds, many investors are pursuing lawsuits and arbitration to recover losses. However, financial advisors indicate that the ultra short bond fund lawsuits may be the least of Schwab’s concerns. Many advisors suggest that the mismanagement of the fund will likely cause them to stay away from other proprietary funds offered by Schwab.
Ultra short bond funds are designed to be relatively conservative investments which generate current income with minimal fluctuations in share price. However, investors in Schwab YieldPlus have seen losses of nearly 30% this year. These losses were caused by fund managers’ decisions to invest heavily in un-tested and risky sub-prime mortgage backed securities. They also made multiple false and misleading statements about the true nature of the risk investors in the YieldPlus Bond Fund would be exposed to.
In a recent article in Investment News, which is a news source designed for financial advisors, concerns were expressed about the fund management arm of Charles Schwab. Schwab has minimized the problems and attempted to settle with the least sophisticated investors first, for substantially less than they lost. Several advisors quoted by Investment News indicated that they will be staying away from Schwab funds in the future.
PROBLEMS WITH OTHER ULTRA SHORT BOND FUNDS
Schwab YieldPlus is not the only ultra-short bond fund which has experienced substantial losses this year tied to investments in subprime loans. Some of the other funds for which potential Ultra Short Bond Fund lawsuits may be filed include:
- SSgA Yield Plus Fund, which State Street decided to liquidate in May after it fell 19% in 2008 as a result of 51% of the fund assets being in mortgage-related securities.
- Evergreen Ultra Short Fund, which Wachovia decided to liquidate in June after it dropped 20% in the first half of 2008.
- Fidelity Ultrashort Bond Fund, which fell nearly 7% in the first three months of 2008.
Despite the recent problems with these ultra-short bond funds, advisors have pointed out that well-managed funds remain a good option for some. Despite exposure to the same market conditions, not all Ultra Short Bond Funds have experienced the same dramatic losses, since many did not bet as heavily on the risky subprime mortgage-backed securities.
ULTRA SHORT BOND FUND LAWYERS
The financial fraud lawyers at Saiontz & Kirk, P.A. are investigating potential claims for investors in Schwab YieldPlus, Wachovia Evergreen Ultra Short, State Street Yield Plus and Morgan Keegan Bond funds. If you, a friend or family member have lost over $10,000 from an investment in an ultra short bond fund, request a free consultation and claim evaluation.
