Following a year of big financial losses in many of its bond funds, OppenheimerFunds has begun slashing jobs and laying off employees. The New York-based company’s bond funds lost an average of nearly 30% in 2008, as customers withdrew some $12 billion. That puts Oppenheimer in the bottom 11% of competitors, according to Bloomberg.
The combination of investment losses and a mass exodus of clients had a dramatic effect on the money-management firm’s bottom line. As of Dec. 31, Oppenheimer’s assets had fallen by 45%.
This week, OppenheimerFunds announced plans to immediately reduce its workforce by about 10%. The loss of 220-plus positions will affect offices in New York, Boston, Rochester and Denver.
Adding to OppenheimerFunds’ woes is the ongoing case involving Bernard (Bernie) Madoff and his alleged $50 billion Ponzi scheme. Tremont Group Holdings, which is owned by OppenheimerFunds, invested $3.4 billion with Madoff.
Oppenheimer’s biggest problems stem to ill-timed bets on subprime mortgage securities and risky credit-default swaps, which created a financial crisis for investors of the Oppenheimer Champion Income Fund (OCHCX). The fund plummeted by more than 80% in value last year, making it the worst-performing taxable high-yield bond fund of 2008. By comparison, similar bonds were down 30%.
The manager of the fund, Angelo Manioudakis, resigned from Oppenheimer last month.
Other Oppenheimer funds have been on a losing streak, as well. The Oppenheimer Core Bond Fund (OPIGX), which is offered by 529 plans in Oregon, Texas, Maine and New Mexico, fell nearly 40% last year. By comparison, similar funds posted 4% gains.
Then there’s the Oppenheimer Rochester National Municipals Fund. Managed by Ronald Fielding, the fund dropped about 50% in 2008.
Meanwhile, investors of several Oppenheimer bond funds have filed claims with the Financial Industry Regulatory Authority (FINRA). Among their charges: Oppenheimer managers represented certain funds, including the Champion Income Fund and the Core Bond Fund, as ultra-safe and conservative when, in fact, they were tied to high-risk, speculative investments.
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