Evergreen Announces Liquidation Of Ultra-Short Opportunities Fund
Ultra-short bond funds have been hammered in the financial boxing ring lately. Now, Evergreen Investments’ Ultra-Short Opportunities Fund is the latest fund to be KO’d.
Banking giant Wachovia announced June 20 that its Evergreen Investments unit will shut down the fund to the tune of $403 million - less than half of its value six months ago.
An ultra-short bond fund is a mutual fund that invests in fixed-income instruments with extremely short-term maturities. As with other mutual funds, ultra-short bond funds invest in a wide range of securities - including corporate debt, government bonds, subprime mortgages, and other asset-backed securities.
Like a number of ultra-short bond funds this year, Evergreen’s Ultra-Short Opportunities Fund has struggled to stay afloat under the weight of the subprime crisis. The fund - which had nearly three quarters of its assets in mortgage-backed securities - lost more than 20 percent this year, making it the second worst performing of the ultra-short bond funds tracked by Morningstar Inc.
According to a press statement issued by Evergreen Investments, investors in the Ultra-Short Opportunities Fund will receive $7.48 a share, or the equivalent of the fund’s net asset value as of June 19.
As reported in a June 20 article on Bloomberg.com, the demise of the Ultra-Short Opportunities Fund highlights the difficulty asset managers have in pricing illiquid securities. According to Bloomberg, the fund was carrying a $13 million slice of the Novastar ABS CDO I Ltd., which was created last year out of low-rated subprime- mortgage bonds, at $9.1 million, or 70 percent of its face value.
Other funds in the same boat as Evergreen’s Ultra-Short Opportunities Fund include Schwab’s YieldPlus fund, which is down an astonishing 29 percent and considered the worst performer among ultra-short funds, and Fidelity Investments Ultra-Short Bond Fund, which has fallen more than 13 percent.
The financial failures of these funds have prompted investor lawsuits against the companies that marketed them as “safe†investments that would provide higher returns than money-market funds with only a marginally higher risk factor.
As it turns out, investors who owned shares in many ultra-short bond funds - including Evergreen’s Ultra-Short Opportunities Fund – were in fact highly exposed to toxic subprime-backed securities.
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.
