According to InvestmentNews, the expected default of Puerto Rico Electric Power Authority, or Prepa, has raised concern for some money managers. Approximately one in four U.S. Municipal bond funds hold some exposure in the power utility. The exposures typically account for less than 1% of the various fund’s portfolio. However, that does not appear to be the case for some single-state and high yield funds.
InvestmentNews analysis of data from Morningstar Inc. found that some single-state and high yield funds have exposure risk around or above 2%. The data analysed included funds from Oppenheimer and Franklin Templeton Investments.
According to InvestmentNews, Oppenheimer funds and Franklin Templeton Investments have both filed federal lawsuits alleging that the new law passed by local lawmakers, which would allow the power utility to ask bondholder to take a loss, is illegal.
Many investors have suffered losses in bond funds heavily invested in Puerto Rico debt. The White Law Group continues to investigate the liability that brokerage firms may have for recommending these funds.
Broker dealers are required to insure that investment recommendations are suitable given the client’s age, investment experience, net worth, investment objectives and risk tolerance. Given that most municipal bond investors are trying to play it safe, risky bets on Puerto Rican debt likely made these funds unsuitable for them.
If you suffered losses in a bond fund overexposed to Puerto Rico, like from Oppenheimer or Franklin Templeton Investments, and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at (312)238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.
For more information on the firm, visit www.whitesecuritieslaw.com.