The Fund produced a first-quarter total return of 0.27%, compared with the 0.08% return of the benchmark. The primary positive contribution to performance came from above-average income from the Funds investments in corporate bonds. However, this was slightly offset in March by the Funds duration positioning, as yields of two- and three-year bonds rose. The Funds floating-rate bond position cushioned price volatility, as intended.
The Feds ultimate path for short-term rate hikes will continue to be data dependent, with factors such as employment growth, capacity utilization and inflation serving as key benchmarks. While we expect yields to move directionally higher through the rest of 2014, the path will no doubt be volatile and thus a source of opportunity for ultra-short fixed-income investors.
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 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 yield more than a money market fund with potential for capital appreciation.
- Strive to maintain a 6-18 month average maturity, under normal circumstances, with a maximum security maturity of three years.
- Manage Fund in an effort to have an average portfolio quality of A or better, with all securities to be investment grade.