Schwab YieldPlus Funds: An Investing Gamble That Backfired
In financial circles, ultra-short bond funds were once considered as one of the more conservative, relatively low-risk investments. All that changed, however, when a new mix of untested and highly speculative financial products became available on Wall Street, the result of which has cost investors dearly.
Thousands of investors across the country have lost millions of dollars in certain ultra-short bond funds that initially were marketed as investments similar to money-market funds - fixed-income products supposedly geared toward conservative-minded investors. Instead, many of these funds were weighted down by toxic subprime-related assets. When the subprime mortgage crisis began to unfold in the summer of 2007, the value of funds holding these types of risky investments plummeted, leaving investors facing massive financial losses.
Two funds that fit this bill include the Charles Schwab YieldPlus Fund (SWYPX) and Charles Schwab Plus Select (SWYSX). Despite assurances by Schwab managers that the funds would invest in a large and diversified portfolio, a substantial portion of the funds’ assets actually were in high-risk subprime mortgage securities and collateralized debt obligations (CDOs). These types of securities were untested, speculative products, a fact investors were never made aware of. Ultimately, Schwab’s gamble backfired miserably, and the Schwab YieldPlus funds experienced losses far greater than similar ultra-short bond funds.
The Financial Industry Regulatory Authority (FINRA) continues to review hundreds of arbitration claims filed by investors who lost money in the Schwab YieldPlus funds.
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.
