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