Short-term rates declined modestly during the period, benefiting the ultra-short-term market. Our goal is to be a highly diversified portfolio that acts as a cash surrogate, limiting price fluctuation to the greatest extent possible while offering an attractive, risk-adjusted yield relative to our benchmark and to money markets. We seek to maintain minimal exposure to cash but consider our 12% allocation to nominal Treasuries to be a reliable source of liquidity.
The Ultra Short-Term Bond Fund returned 0.27% in the quarter compared with 0.09% for the Barclays Short-Term Government/Corporate Index. The Since Inception (12/03/2012) total return was 0.22% as of September 30, 2013. The fund's expense ratio was 0.61% as estimated on the fund's inception date, May 31, 2013.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
Our overweight in short-term investment-grade corporate bonds helped performance during the quarter. Short-term corporate securities outperformed short-term Treasuries, which helped results. We were underweight in Treasuries relative to our benchmark and overweight in corporate securities. We also had an out-of-benchmark position in asset-backed securities and commercial mortgage-backed securities. We increased our floating rate debt allocation through the sale of longer-duration securities. We have been adding to corporate bonds from both the primary and secondary markets, with heavy issuance in the primary market making it a key source for portfolio additions. Where possible, we have been focusing on attractively priced A rated securities with maturities in the 15- to 24-month range (including both fixed and floating rate debt).
The Ultra Short-Term Bond Fund is an alternative investment vehicle for investors seeking more income than can presently be earned on money funds. It offers incremental credit and interest rate risk above money funds for investors unwilling to take on the additional risk presented by longer-term fixed income securities. Despite the Federal Reserve's tapering delay, we believe the Fed will eventually scale back its asset purchase program and normalize monetary policy. However, the Fed's delay has left us slightly less concerned about the urgency and pace of the central bank's eventual tightening. Nonetheless, we are approaching an inflection point in the markets where tapering will begin and low rates will need to be unwound. We will remain defensive in light of this expected development, even as we acknowledge that Fed tightening may be slower than markets expected.