Yields on two- and three-year U.S. Treasuries finished the quarter at about the same level where they began, but this obscured the volatility that occurred during the period. Yields spiked in July and August on concern that the U.S. Federal Reserve would taper its quantitative easing policy, and then declined in September when the Fed announced that it would not in fact be reducing the amount of its asset purchases in the near future. While the quarter was eventful, it should be noted that short-term bonds were much less volatile than their intermediate- and long-term counterparts.
The Tax-Advantaged Ultra-Short Fixed Income Fund posted a 0.45% return in the third quarter. The Funds one-year total return was 0.64%, versus 0.42% for its benchmark. Both the benchmark and the Fund benefited from the Feds September announcement regarding its securities purchase program.
During the period, we maintained a duration near one year, primarily by employing fixed-rate two- and three-year municipal bonds and municipal floating rate notes. We also utilized taxable corporate bonds when their return, after taxes are considered, exceeded the return on tax-free municipal bonds.
If you're seeking an investment that may generate higher yields than money market funds with less volatility than short duration bond funds, this Fund may be appropriate for you. The Fund, which has a $250,000 initial investment minimum, is intended for investors with an investment horizon of at least one year who are seeking to move a portion of their money market fund assets.
The Fund is not a money market fund, which maintains a $1.00 NAV, and the Fund's share price will fluctuate with its returns.
- Seek to provide investors in higher tax brackets more after-tax yield than a money market fund with potential for capital appreciation.
- Strive to maximize after-tax return by pursuing best net after-tax yield and total return opportunities in both taxable and tax-exempt securities.
- Strive to maintain a 6-18 month average maturity, under normal circumstances, with a maximum security maturity of three years. Also manage Fund in an effort to have an average portfolio quality of A or better, with all securities to be investment grade.