Schwab High Yield Plus Select Fund Under Fire
Damage control is probably being kicked into high gear at Charles Schwab Corp. these days. Investors in Schwab's High Yield Plus Select Fund (SWYSX) are learning that the fund has tumbled 22 percent since January 2007, caught up in excessive investments related to subprime-mortgage-backed securities.
Many investors are crying foul because they say the fund was presented as a low-risk money-market fund. Like bank accounts and government debt, money-market funds are considered to be one of the safest investments, and are promoted by Schwab and other firms as cash alternatives.
Now, however, investors have found out the hard way just how safe their "money-market fund" was. The fact that the concentration of collateralized mortgage obligations (CMOs), backed by subprime loans and other mortgage-related investments, certainly made an investment in the fund more aggressive than cash equivalent and money market investments.
The problem is that neither Schwab nor the advisors who bought the fund for clients highlighted the extra risk involved. Instead, they touted the extra yield the fund could achieve. Of course, in the process, they took in higher commissions, as well.
As for investors, they're left wondering where the “safe” money went.
In the summer of 2007, our group, who individually and collectively have extensive experience in representing investors against Wall Street, formed an affiliation. Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage related investment losses. Contact us.
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