Intermediate- and long-term U.S. Treasury yields decreased sharply in the first quarter, as risk aversion at the beginning of the year benefited safe-haven securities. A strong reversal in sentiment toward riskier asset classes in February boosted high yield bonds and emerging markets debt in the second half of the quarter, but ongoing demand for U.S. Treasuries kept yields low. Government bonds from non-U.S. developed markets rallied strongly as both the European Central Bank and the Bank of Japan supplemented their stimulus efforts by cutting some lending rates into negative territory and increasing the size of quantitative easing programs. The U.S. dollar weakened against the euro and the yen as well as many emerging market currencies.
The Global Multi-Sector Bond Fund returned 3.27% in the quarter compared with 2.68% for the Barclays Global Aggregate ex Treasury Bond USD Hedged Index and 3.65% for the Lipper Global Income Funds Average. For the 12 months ended March 31, 2016, the fund returned 2.18% versus 1.49% for the Barclays Global Aggregate ex Treasury Bond USD Hedged Index and 0.09% for the Lipper Global Income Funds Average. The fund's average annual total returns were 2.18%, 3.84%, and 7.28% for the 1-, 5-, and Since Inception (12/15/2008) periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.82% as of its fiscal year ended May 31, 2015.
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With potentially more Fed tightening and volatility on the horizon, we have positioned the portfolio with a relatively low to moderate level of risk compared with the past. Security and currency selection remain crucial, and we rely on our analysts to provide ideas to generate incremental returns. At the end of the quarter, the portfolio's duration was slightly shorter than that of the benchmark. (Duration is a measure of sensitivity to changes in interest rates.) We were slightly underweight duration in developed markets and overweight duration in selected emerging markets. Within the corporate bond allocation, we have a modest preference for the U.S. over Europe. The portfolio's currency exposure is positioned to benefit from declines in the British pound and the yen.
The plethora of global risks, including uncertainty around global growth, commodities, monetary policies, and geopolitical pressures, will likely result in additional periods of elevated volatility. Given this outlook, we will continue to focus on liquidity, which tends to be undervalued in uncertain market environments. With no particular sectors currently offering high-conviction relative value, we maintain a balanced portfolio and anticipate that tactical allocation moves and security selection will generate the bulk of the portfolio's returns. However, the portfolio currently maintains ample allocations to higher-liquidity sectors, such as global developed market sovereigns and agency mortgage-backed securities, which may allow us to add value to the fund by taking tactical advantage of attractive valuations as they arise.