According to the lawsuit, some Morgan Keegan funds lost over 50% of their value during 2007. The lawsuit further alleges that fund managers put a large portion of the investment in new forms of securities that were not tested through market cycles. This exposed investors in Morgan Keegan funds to more risk than other investors were exposed to. According to an article in the Memphis Flyer, other funds in the same peer group as the Morgan Keegan funds either had positive returns or losses of less than eight percent, making the losses experienced by Morgan Keegan funds seem outrageous.
Allegedly, Morgan Keegan bond mutual funds were advertised as an investment that would provide high yields without excessive risks. The investments were made in illiquid securities that are rarely traded and do not have active price quotes that are maintained. When the subprime mortgage crash occurred, these investments suffered substantial losses.
Investors argue that they were given the false impression that Morgan Keegan bond mutual funds were a safe and stable investment. They note that if they had been given the truth about the risks involved in the mutual funds, they would not have accepted the level of risk. Specifically, they are upset about the large investments in mortgage-backed securities.
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Class action lawsuits have been filed against Morgan Keegan on behalf of all investors who purchased or otherwise acquired shares in the company's bond mutual funds between December 2004 and October 2007.