A major shareholder is up in arms about an abrupt change in investment strategy at the $797 million ( WIW) Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2 (WIW).

In May, the three-year-old closed-end bond fund announced it would alter its investment strategy so that it could allocate as much as 40% of assets "below investment-grade securities" securities, or junk bonds. The fund is also removing its 80% minimum allocation to inflation-protected securities, or TIPS. The fund is also changing its name to the Western Asset/Claymore Inflation-Linked Opportunities and Income Fund, to better reflect the new strategy, effective Aug. 7.

The new strategy will make the fund significantly riskier. TIPS are considered very safe because they are both backed by the U.S. government and indexed to inflation. By comparison, junk bonds offer higher returns, but investors are taking on both the risk that the issuer will default and that rising inflation will erode the value of their returns.

"I've never seen such a drastic change to investment policy where the manger didn't seek shareholder approval," says Cody Bartlett Jr., investment strategist and senior fixed-income analyst for Karpus Investment Management. "It's a bait-and-switch" scheme.

Karpus, a money manager based in Pittsford, N.Y., is the fund's second-largest shareholder, with a 6.5% stake. It has filed a complaint with the Securities and Exchange Commission.

Bartlett says Karpus has a lot of pension fund clients that are restricted from investing in high-yield bonds and or bonds linked to other currencies. So it will have no choice but to dump its shares once the new investment strategy is in place. And since the fund is currently trading at a 10.13% discount to its net asset value, according to Morningstar, Karpus would have to leave a lot of money on the table.

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