Investors In Reserve Yield Plus Fund Put Pressure On TD Ameritrade

Its corporate Web site says, “We’re Here When You Need Us.” Unfortunately for a number of TD Ameritrade clients, the brokerage has been missing in action when it comes to the Reserve Yield Plus Fund.

The Reserve Yield Plus Fund was marketed to investors by TD Ameritrade as a “money market fund” - a conservative-type investment that offered immediate liquidity for clients who needed quick access to their cash. In reality, the Yield Plus Fund is an “enhanced cash fund,” an investment vehicle that invests in short-term debt. Moreover, investing and disclosure restrictions on products like the Yield Plus Fund are much less stringent than those of money market funds and therefore leaves investors more open to risk.

Last month, investors learned that their accounts in the Reserve Yield Plus Fund had been frozen. According to TD Ameritrade’s Web site, the net asset value of the fund was $0.97 per share as of 5 p.m. on Sept. 16, 2008. On Oct. 9, 2008, the Board of Trustees of Reserve Short-Term Investment Trust announced agreed to liquidate the assets of Reserve Yield Plus Fund.

Reserve Management Corp. is the manager of the Yield Plus Fund, as well as the Reserve Primary Fund. In September, the Reserve Primary Fund - a money-market mutual fund - broke the buck, which is Wall Street lingo to describe a situation when investors might receive less than a dollar-for-dollar return on their investment.

On Sept. 16, the Primary Fund’s assets fell in value to 97 cents on the dollar. Reserve Management is now liquidating the Primary Fund, and shareholders are facing losses of pennies on the dollar.

TD Ameritrade Holding Corp. apparently has pledged some $50 million to help cover losses for some of its clients in the Primary Fund Primary.  The offer, however, doesn’t apply to Yield Plus investors, even though Yield Plus includes a high concentration of shares in the Primary Fund among its assets.

Meanwhile, investors remain in an unexpected and unwelcome holding pattern. They have hundreds of millions of dollars in the Yield Plus Fund that they cannot take out, with no word from TD Ameritrade on if or when their situation will be resolved or exactly how much they can expect to get back from the $1 billion fund.

As for TD Ameritrade, information on its Web site appears to be as illusive as the brokerage’s marketing of the Yield Plus Fund as a safe investment haven for investors needing immediate access to cash. In short, TD Ameritrade states the Yield Plus Fund’s assets will be liquidated “as soon as possible,” but that it is not in “shareholders’ interests to sell those assets at their current market values.”

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This entry was posted on Tuesday, October 14th, 2008 at 1:06 pmand is filed under Bond Funds, TD Ameritrade. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.