The Schwab YieldPlus Fund(SWYPX Quote) began to unravel in August 2007.
The fund lost 1.7% that month, a shocking development for a short-term bond portfolio that had been considered safe. The trouble started when portfolio managers tried to squeeze out more yield by investing in subprime mortgages. After seeing the losses, mutual fund investors dumped their shares.
Schwab(SCHW Quote) portfolio managers sold investments at discounted prices to raise cash to cover withdrawals, worsening the situation. The trickle of redemptions turned into a flood. The fund's assets fell to less than $300 million from $13.5 billion in less than in 15 months. Those investors who stayed aboard lost 42%, during the 12 months through February, according to Morningstar(MORN Quote). ...
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