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Thursday, April 22, 2010

About that Schwab Yield Plus Fund

WSJ reports:a settlement in the investor case (and a likely $60 million payday for the attorneys)

Charles Schwab Corp. agreed to pay $200 million to aggrieved investors who claimed the online discount broker had deceived them, but shares rose as investors had feared the final settlement costs would be much higher.
The San Francisco company agreed to pay out to customers in its Schwab YieldPlus Fund, which the plaintiffs said deceived them about the nature of short-term investments on which they posted losses when the credit crisis struck.
Plaintiffs had claimed more than $800 million in damages. Schwab didn't admit liability under the settlement, which needs final court approval.

And this time around Morninstar is urging investors to stay away from the fund....better late than never I guess: from the wsj article

In a research note in late January, Morningstar fund analyst Miriam Sjoblom questioned whether YieldPlus could offer steady returns in the future.
"As the managers have continued to sell bonds to meet redemptions—the now $300 million-in-assets fund has seen $11.6 billion in redemptions since mid-2007—the fund's portfolio mix has been altered, and not for the better," Ms. Sjoblom wrote. "Its top 10 holdings...took up more than half the fund's assets as of the latest portfolio from Aug. 31, 2008." She added that such a "lack of diversification should consign the fund to a bumpy road ahead."