Oppenheimer Champion Income Fund "If it walks like a duck"
Earlier today, we filed a class-action suit on behalf of investors in the Oppenheimer Champion Income Fund (OPCHX). We are claiming that the fund managers misled investors; we contend they painted the fund as a conservative, high-income fund with a risk profile at par with other funds in its class. Instead, we believe Oppenheimer actually morphed the fund into a much riskier, volatile fund, investing in highly speculative derivates.
You know the old saying, if it walks like a duck...
From what we see here and what we've heard from investors, this fund has more in common with a hedge fund than a high-income fund.
The issue is that when Oppenheimer touted these funds to investors, we believe they hid the ugly parts of the duck - the risk - and touted the benefits.
We are learning from clients and through our own investigations that until 2006, the fund was chugging along - dare I say waddling - delivering reasonable returns as a bond fund, but during that year, the fund managers started altering the fund's strategy, likely in hopes of goosing the returns upward. It appears that the fund managers began purchasing complex derivative instruments, along with mortgage-backed securities without informing investors of these monumental changes to the fund's risk profile.
It also appears that Oppenheimer took investor money and purchased Credit-Default Swaps (CDSs), essentially insurance-like products that protect other investors against defaults. In this approach, the fund backed the risks of others' investments in things as diverse as office-building leases. This appears to be a horrible choice. By September, it appears that the losses tied to CDSs alone cost the fund $47 million.
Investors purchased fund shares through major brokerages like Citigroup, Smith Barney, UBS and Merrill Lynch to name a few, thinking they found an investment that would provide a reasonable return for its risk class. Instead, investors lost about 80 percent in 2008, with November delivering a whopping 55 percent loss in that month alone.
Also interesting, is that Oppenheimer didn't discriminate to whom they marketed the fund. It appears about 10 percent of the fund was held by other Oppenheimer funds.
We anticipate that Oppenheimer will try to defend its actions, saying they were acting in the interests of the fund investors. They will probably point to a $150 million injection of capital to increase the fund's liquidity. They will also point to other internal changes, but we also suggest this may be in response to these issues.
For the time being, we have a lot of upset investors, who lost a lot of money and most upsetting is that it could have been avoided. We believe fund managers pushed too hard when they increased the percentage of investments in mortgage-backed investments, violating the funds policies and did so without warning the funds owners, the investors.
We're certainly hearing a lot of ‘quacking.' If you've suffered losses with the Champion Fund we'd like to hear from you - feel free to contact us at [email protected].
You know the old saying, if it walks like a duck...
From what we see here and what we've heard from investors, this fund has more in common with a hedge fund than a high-income fund.
The issue is that when Oppenheimer touted these funds to investors, we believe they hid the ugly parts of the duck - the risk - and touted the benefits.
We are learning from clients and through our own investigations that until 2006, the fund was chugging along - dare I say waddling - delivering reasonable returns as a bond fund, but during that year, the fund managers started altering the fund's strategy, likely in hopes of goosing the returns upward. It appears that the fund managers began purchasing complex derivative instruments, along with mortgage-backed securities without informing investors of these monumental changes to the fund's risk profile.
It also appears that Oppenheimer took investor money and purchased Credit-Default Swaps (CDSs), essentially insurance-like products that protect other investors against defaults. In this approach, the fund backed the risks of others' investments in things as diverse as office-building leases. This appears to be a horrible choice. By September, it appears that the losses tied to CDSs alone cost the fund $47 million.
Investors purchased fund shares through major brokerages like Citigroup, Smith Barney, UBS and Merrill Lynch to name a few, thinking they found an investment that would provide a reasonable return for its risk class. Instead, investors lost about 80 percent in 2008, with November delivering a whopping 55 percent loss in that month alone.
Also interesting, is that Oppenheimer didn't discriminate to whom they marketed the fund. It appears about 10 percent of the fund was held by other Oppenheimer funds.
We anticipate that Oppenheimer will try to defend its actions, saying they were acting in the interests of the fund investors. They will probably point to a $150 million injection of capital to increase the fund's liquidity. They will also point to other internal changes, but we also suggest this may be in response to these issues.
For the time being, we have a lot of upset investors, who lost a lot of money and most upsetting is that it could have been avoided. We believe fund managers pushed too hard when they increased the percentage of investments in mortgage-backed investments, violating the funds policies and did so without warning the funds owners, the investors.
We're certainly hearing a lot of ‘quacking.' If you've suffered losses with the Champion Fund we'd like to hear from you - feel free to contact us at [email protected].
