Inflation protected fund?  Think again. Michael Katz from TheStreet.com finds Western Asset Management changing the nature of its inflation protected securities fund (WIW – $11.57) to allow it to hold 40% junk bonds.

You thought you were buying a portfolio of inflation-linked TIPS but here they go and change the fund on you.  Maybe you bought the $797 million Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund 2 at a 10% discount to its Net Asset Value (which is about where it is trading now), only to find the strategy changed. 

I owned this fund for myself and one of my friends a couple of years ago.  I sold it out in favor of the index fund related ETF, (TIP – $97.96) over a year ago because of the huge fee differential.  I'm glad I did and I'll be sure fees aren't the only reason to stay away from closed-end funds managed by Western Asset Management.  Of course, there is always a discount to net asset value that a closed-end fund can offer me to make me buy at some point.

Disclosure:  I bought WIW in January of 2006 and sold it in May and October of that same year.  I own TIP for myself, my mother, and a couple friends.  Currently it should make the fixed income cornerstone of any inflation fearful investor. Other Panelist Stories on TIPS.

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