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SLCG Releases Schwab YieldPlus Report
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(July 21, 2009 - Tuesday) - http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/07-21-2009/0005063252&EDATE=
WASHINGTON, July 21 /PRNewswire/ -- Securities Litigation and Consulting Group, Inc. ("SLCG") this morning released "Schwab YieldPlus Risk", a research report on the Schwab YieldPlus (SWYSX and SWYPX) ultra short bond fund. From June 2007 through June 2008, investors in YieldPlus lost 31.7% when other ultra short bond funds had little or no losses. Schwab had marketed YieldPlus as a low risk, higher yielding alternative to money market funds.
The report concludes that YieldPlus's extraordinary losses occurred because the fund held much larger amounts of securities backed by private-label mortgages than other ultra short bond funds. In doing so, Schwab's fund violated concentration and illiquidity limits stated in its prospectus. These private-label mortgage-backed securities holdings had given YieldPlus a slight advantage over its peers prior to 2007. Unfortunately, the extra yield was an order of magnitude smaller than the losses that followed when the value of structured finance securities - especially those backed by mortgages - dropped significantly.
SLCG also found that Schwab significantly inflated the value of YieldPlus's holdings and therefore its NAV in late 2007 and early 2008. By inflating the YieldPlus fund's NAV, Schwab provided existing investors incorrect information about the value of their investments and caused new investors to overpay for shares in YieldPlus.
This study and other working papers are available at http://www.slcg.com/research.php.
Securities Litigation and Consulting Group, Inc. ("SLCG") is a financial economics consulting firm based in the Virginia suburbs outside of Washington, DC. SLCG provides consulting services and expert witnesses to law firms, publicly-traded corporations, banks, brokerage firms and individuals involved in complex litigation throughout the United States. SLCG's staff includes PhD, MA and BA level professionals with academic, industry and government experience. Its experts have testified in state and federal court and in various arbitration forums.
For further information about SLCG or its research, please contact Dr. Craig McCann at 703-246-9381, craigmccann@slcg.com or visit us at http://www.slcg.com.
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