Morgan Keegan Funds Crash
Sonn & Erez is Representing Investors to Sue to Recover Losses
For years, bond funds run by Morgan Keegan's Jim Kelsoe soared like an eagle, flying high. Then, Kelsoe strayed too close to the sun and came crashing back on melted wings.
Kelsoe's losses to date are shocking. Regions Morgan Keegan Select High Income plummeted 75% through February 28, 2008, and Regions Morgan Keegan Select Intermediate Bond 84%. Results of four closed-end Morgan Keegan fixed-income funds also managed by Kelsoe have also been disastrous. For example, the Regions Morgan Keegan Select Hi Inc I (symbol RHIIX) is down 76%,Regions Morgan Keegan Select Int Bd I is down 84%.
There are allegations that Morgan Keegan misrepresented the risk of the Regions MK Select Intermediate Bond fund, which, on the surface, seems to be a plain-vanilla, low-risk bond fund. We believe investors were not adequately advised about the risks. The SEC has begun an investigation into the funds. Jim Kelso and Asset Management have also been fired from managing several bond funds.
Until this year, Jim Kelsoe, the chief-fixed income investment officer of the Memphis-based brokerage's Morgan Asset Management, posted outstanding results. For example, from 2000 through 2005, Regions MK High Income landed in the top 1% of high-yield bond funds every year but 2003, according to Morningstar.
Class actions have been filed in Morgan Keegan bond fund cases.
However, we at Sonn & Erez, a law firm with a national litigation practice in securities law, believe that investors are better off suing on their own in arbitration or court.
“We believe investors have a better chance at getting more money in arbitration or court than in a class action,” said attorney Jeff Sonn, Esq. managing partner of Sonn & Erez. “We have filed arbitration cases before the Financial Industry Regulatory Authority, and expect these cases will get to a trial within 13-16 months, whereas the class actions could take many years,” added Sonn. Jeff Sonn, Esq. is presently a member of the board of directors of the Public Investors Arbitration Bar Association, and speaks and writes on securities arbitration regularly. An established and highly respected firm, Sonn & Erez has recovered millions of dollars for aggrieved investors in all kinds of securities fraud cases.
Contact a lawyer at our firm online or call 1-866-372-8311 toll free nationwide. Our experienced lawyers at Sonn & Erez are handling these cases nationwide on a contingency fee basis. This means that if there is no recovery, no fee is charged.
Why did Morgan Keegan funds crash?
Two reasons, high risk investments and a run on the bank for redemptions by investors fleeing the funds. First, reaching for yield, Kelso invested a large amount of the funds in high risk and illiquid asset-backed securities (and relatively little to plain high-yield corporate bonds) that have been devastated by the crash of the subprime and credit markets this year. For example, as of June 30, 2007, according to a Kiplinger article, 45% of Intermediate Bond's assets were invested in collateralized debt obligations and home-equity loans. Kelso also invested in airline leasing obligations, which have been crushed by market turbulence this year. So, Morgan Keegan’s fund assets plunged. Second, and equally as bad, was the sudden rise of shareholder redemptions, which forced Kelsoe and Morgan Keegan to sell illiquid assets (investments that are not readily marketable) in the worst possible market. In both July and August, 2007, for example, shareholders pulled more than $100 million out of High Income.
Investors got their statements in the mail, and obviously panicked, and many sold. This forced Morgan Keegan’s Jim Kelso to liquidate parts of the portfolios in a very bad market at bargain basement prices.
The problem, for example, is that there are only a handful of trading desks in the country that handle airline lease-related securities, such as the ones bought by Morgan Keegan. Assets like these might eventually recover, but for now, they have devastated the MK funds. Illiquid assets like airplane leases are ill suited to open-end funds, which are subject to abrupt and mass redemptions.
Trust your individual Morgan Keegan issues to an attorney at Sonn & Erez.
If you are looking for options to recover money lost on Morgan Keegan bond funds, contact us online or call 1-866-372-8311 toll free nationwide. Our firm is committed to aggressively representing investors who have been victims of stockbroker fraud, lost money on retirement plan investments, or has other securities litigation issues.
