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Monthly Archives: October 2008

Liquidated Commonfund Creates Severe Financial Dilemmas for Colleges

With the abrupt liquidation of the widely held short-term investment fund managed by Connecticut-based Commonfund, more than 1,000 colleges across the country suddenly confront serious financial problems. With Wachovia Corp. as trustee, the $9.3 billion Commonfund for Short Term Investments Fund basically provided colleges with a “checking account” out of which they could pay for salaries, supplies and other expenses.

Without any prior warning, Wachovia sent an e-mail to schools on September 29 explaining that ongoing market turmoil forced the firm to give up its role as trustee of the Commonfund. Approximately 20% of the fund’s mortgage and asset-backed securities suffered because of market conditions.

According to the terms of the liquidation, participants could withdraw approximately 34% of their funds as of October 1. The amount grows to as much as 57% by the end of the year. Any remaining funds can be withdrawn as other securities mature.

Unfortunately, as of September 29, hardly any of the fund’s non-government securities could be sold at par.

How will colleges cope? The University of Vermont, just one participant in the Commonfund, invested almost $80 million. Right now, the school can only withdraw $16 million. The withdrawals allowed over the next few months won’t provide enough cash to pay the school’s operating costs for the rest of this year, according to the Burlington Free Press in an October 2 article. Because of Wachovia’s decision to liquidate, administrators at the University of Vermont and many other schools now must scramble to find other financing sources.

PIMCO High Income Fund Loses Over Half Its Value

The PIMCO High Income Fund (NYSE:PHK) has lost 55% of it value in one very turbulent month.  On September 10 this Fund closed at $11.49.  By October 10 its value had plummeted to $5.07.  

According to its disclosures, the PIMCO High Income Fund operates as a closed-end management investment company. It primarily invests in the U.S. dollar-denominated corporate debt obligations and other income-producing securities. The fund primarily invests in various companies operating in the areas of energy, real estate, telecommunications, manufacturing, and utilities, as well as invests in various foreign investments. Allianz Global Investors Fund Management LLC serves as the investment manager of the fund. PIMCO High Income Fund was founded in 2003 and is based in New York City.

The Fund’s Market Cap is currently 850.64M.

We are investigating the way this Fund was marketed and sold to investors. If you are an investor in the PIMCO High Income Fund and have suffered losses, we would like to speak with you.

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