Corporate & Securities Law

Schwab YieldPlus Fund Select Shares and Schwab YieldPlus Fund Investor Shares now are subject to an investor arbitration claim filed at FINRA. 

Regarding the ultra-short bond fund Shwab YieldPlus, Morningstar states that the fund's sizeable loss in recent months is certainly shocking as ultra short-term fixed income securities are generally perceived to be safe investments with minimal interest-rate and credit risks.  The fund first showed signs of distress last summer when subprime mortgage woes caused market liquidity to dry up.  Lead manager Kimon Daifotis has taken on slightly more credit risk than his category peers and kept the portfolio heavily invested in corporate and nonagency mortgage bonds, with a small exposure to subprime-backed bonds.  These securities took a sizeable hit, and the fund proceeded to lose 3.6% in the latter half of 2007.  That was enough to send investors heading for the exits, and it appears that management was forced to sell bonds at depressed prices to meet redemptions.  Because many of the fund's losses are already locked in, the chance of a rebound is slim, according to Morningstar.

Other short-term funds have suffered similar misfortunes.  A few similar funds, such as Fidelity Ultra-Short Bond Fund and SSgA Yield Plus from State Street Global Advisors have been hurt in recent months as well, yet weren't as popular as the Schwab fund.