Oppenheimer sued over California fund

OppenheimerFunds Inc. of New York is facing a class-action involving its California Municipal Fund, which lost 41.3% last year. A claim filed yesterday in the United States District Court for the Northern District of California by investor Robert Rivera, alleges that the New York-based fund group misled investors by concentrating its California Municipal Fund portfolio in junk and unrated bonds. The fund had about a third of its assets in the California real estate development industry through investments in “dirt bonds,” according to a statement from the Sparer Law Group of San Francisco, the plaintiff's law firm handling the claim. As of last month, the fund held $771 million in assets, according to Morningstar Inc. of Chicago. Sparer Group founder Alan Sparer, was not immediately available for comment. “OppenheimerFunds believes that the claim is without legal merit and intends to defend itself vigorously,” said spokeswoman Jeaneen Pisarra in a statement. According to an October Morningstar report on the fund, dirt bonds are contracts for land developments that have yet to be built and “are especially risky given the depressed housing market in California.” The volatile Oppenheimer fund underperformed last year when its category lost 30.3%, according to Morningstar, and has been among the worst performers in its category over the long term. But the fund has outperformed when lower-rated paper has been in favor, the research firm said. Last month, the fund's total return was 8.6% according to Morningstar, versus 5.6% for its category.