In the final weeks of the period, however, the environment shifted considerably. First, the Italian election surprised the markets with the rise of the anti-euro/anti-austerity Five Star party. Shortly after, Cyprus faced the threat of bank-deposit flight. These developments led investors to reassess the widely held view that Europe was out of the woods. In addition, U.S. economic data began to slip somewhat in the final weeks of the quarter. The 10-year Treasury yield closed March at 1.85%, well off of its early March peak of 2.06%, but above the 1.75% level at which it closed 2012.
The Fund returned -0.41% and underperformed its benchmark due to its yield curve and duration positioning. Our overweight to mortgage-backed securities also detracted from performance.
If you're a conservative investor who prefers the income and quality offered by government securities, you may find this Fund attractive. It is best suited for income-oriented investors who prefer low risk.
- Invest primarily in securities issued or guaranteed by the U.S. government or by its agencies.
- Select high-quality securities with maturities, under normal circumstances, between two and five years, with risk exposure managed in an effort to achieve reasonable returns.
- Buy and sell securities using a relative value approach that employs models that analyze and compare expected returns and assumed risks.