During the first quarter, interest rates fell notably along the Treasury yield curve, with more pronounced declines in intermediate and long-term yields than in shorter-term yields. Risk aversion stemming from continued concerns about slowing global economic growth, an uptick in volatility in global financial markets, and sustained lower oil prices benefited safe-haven securities. A strong reversal in risk sentiment in the second half of the quarter was supported by a bounce in commodities prices and accommodative central bank actions both domestically and abroad.
The Ultra Short-Term Bond Fund returned 0.66% in the quarter compared with 0.26% for the Barclays Short-Term Government/Corporate Index. For the 12 months ended March 31, 2016, the fund returned 0.70% versus 0.43% for the Barclays Short-Term Government/Corporate Index. The fund's 1-year and Since Inception (12/03/2012) average annual total returns were 0.70% and 0.49%, respectively, as of March 31, 2016. The fund's expense ratio was 0.45% as of its fiscal year ended May 31, 2015.
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.
During the period, we allowed the portfolio's duration to lengthen somewhat as maturities rolled off and we sold some shorter-term maturities. We have increased our focus on liquidity and quality, shifting exposure to securitized sectors and have been adding back to underperforming banks and higher-quality names in oil and metals and mining.
Looking forward, we believe that the ultra-short strategy will offer incremental returns over money funds, while mitigating some of the downside that a rising rate environment might present to longer-term bond strategies. We anticipate that the pace of further Fed rate hikes will be moderate as the central bank will be careful to monitor and consider the impacts of its moves before taking subsequent steps. A gradual pace of rate normalization will present the opportunity to add yield into the portfolio, offsetting some of the potential price volatility.