NEW YORK (Bloomberg) — Fidelity Investments, the world's largest mutual-fund company, is being sued over losses linked to investments in sub-prime mortgage-backed securities made by its Ultra-Short Bond Fund.

Fidelity made "misleading or inaccurate" statements in the bond fund's registration documents, investor Alan Zametkin said in a complaint filed June 5 in US District Court in Massachusetts. The fund has fallen 6.8 percent this year and 13 percent in the past 12 months.

Fidelity's is at least the second ultra-short bond fund sued over sub-prime-related losses. San Francisco-based Charles Schwab Corp., the largest US online broker, faces eight proposed group lawsuits from investors in its YieldPlus Fund, which is down 32 percent in the past year, compared with an average decline of 1.2 percent for similar funds.

" We believe this lawsuit is without merit and intend to defend the case vigorously," Vincent Loporchio, a spokesman for Boston-based Fidelity, said in an interview.

Ultra-short bond funds invest in corporate, mortgage-backed and government securities with maturities of one year or less. The $330 million Fidelity fund's subprime-backed holdings were rated AAA and AA, the highest investment-grade levels, Loporchio said. All ultra-short bond funds faced "an unusually challenging market environment over the past 12 to 18 months," he said.

The complaint, which seeks class-action status, says Fidelity failed to inform investors adequately about the risks associated with the fund's holdings in mortgage-backed securities. The fund invested "nearly two-thirds" of its assets in sub-prime-backed investments, according to the complaint, first reported by the Wall Street Journal.

The world's largest banks and securities firms have absorbed almost $400 billion of losses and write-downs since the start of 2007 after the least credit-worthy borrowers started defaulting on home loans. Pension, money-market and bond funds also invested in mortgage bonds because the securities offered higher returns than government bonds with the same AAA rankings.