What is limited about State Street's Limited Duration Bond Fund? Certainly not the losses this month.

The fund has lost 37 percent of its NAV since August 1 and 42 percent for the year, writes Boston Globe columnist Steven Syre. The $1.4 billion fund is targeted to institutional investors and is intended to offer the safety of a money market fund with enhanced returns. This month's meltdown in the mortgage market insured that the target will not be met as investors will need to nearly double their current stake just to be made whole.

Like hedge funds facing steep losses, SSgA also penned a letter to shareholders explaining the situation and encouraging them to hang in with the "enhanced" cash fund. Based on the letter, Syre guesses that the fund's losses stemmed from investments in mortgage-derived investments.

"While we will continue to liquidate assets for our clients when they demand it, we believe that many judicious investors will hold the positions in anticipation of greater liquidity in the months to come," wrote Sean P. Flannery, an executive with the fund. 

Edited by: Sean Hanna, Editor in Chief


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE