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Strategies & Market Trends : The Residential Real Estate Crash Index
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From: nextrade!6/10/2008 10:10:37 PM
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Fidelity Sued Over Losses in Bond Fund
By JENNIFER LEVITZ
June 10, 2008 6:33 p.m.

online.wsj.com

Fidelity Investments is being sued over losses in the Fidelity Ultra-Short bond fund, which invested in risky mortgage-backed securities.

A purported class-action lawsuit filed in U.S. District Court in Boston alleges that the Boston mutual-fund giant was "misleading" in promoting the fund as a safe alternative to cash and that the company didn't adequately disclose risks.

Fidelity Spokesman Vincent Lopporchio said the "lawsuit is without merit" and that the company intends to "defend the case vigorously."

Fidelity's Ultra-Short bond fund is one of several fixed-income funds that have come under fire and seen investor defections in recent months after losing money in securities tied to subprime mortgages, which are home loans given to borrowers with shaky credit. In the spring, investors sued Charles Schwab Corp. for deep losses in its Schwab YieldPlus fund.

Fidelity's stated objective for the Fidelity Ultra-Short bond fund is to seek a "high level of current income consistent with the preservation of capital." In large part due to its mortgage holdings, the fund is down 6.6% for the year, trailing its benchmark by 7.6%.

Mr. Lopporchio says that the fund's subprime mortgage investments were of the highest quality in that category. Mr. Lopporchio says the ultra-short bond fund has "faced an unusually challenging market."

Write to Jennifer Levitz at jennifer.levitz@wsj.com
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