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The U.S. Federal Reserve (Fed) raised the federal funds rate by a quarter point at its June meeting. This change, well telegraphed in advance, elicited little reaction in the U.S. Treasury market. Yields on two-year U.S. Treasuries rose by 13 basis points (0.13%) in the quarter, while three-year Treasury yields climbed six basis points (0.06%). The markets continued to focus on potential policy changes from President Trump and Congress. Repealing and replacing the Affordable Care Act proved challenging, which in turn put plans for tax reform and infrastructure spending on hold. Employment data and the economy as a whole improved despite the difficulties in Washington, but inflation stayed persistently low relative to the Fed’s stated goal of 2%. The municipal bond market had a strong quarter as demand continued to outstrip supply, keeping yields below historical averages versus Treasury securities.
The Tax-Advantaged Ultra-Short Fixed Income Fund posted a total return of 0.33%, outperforming the 0.24% return of its benchmark, the ICE BofA Merrill Lynch Blend Index.
We maintained a short duration versus the benchmark, which helped performance by reducing the portfolio’s sensitivity to rising short-term yields. Corporate securities, which we purchased at an optimal after-tax yield relative to tax-exempt securities, also enhanced performance. In terms of portfolio activity, we purchased variable rate demand notes and one-year municipal notes with cash from maturing 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 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.|
|YTD Total Return||0.88% (as of 07/20/18)|
|Distribution Rate*||1.32% (as of 07/20/18)|
|30-Day SEC Yield w/ Waivers*||1.58%
|30-Day SEC Yield w/o Waivers*||1.54%
|Total Net Assets||$3,782,254,485
|Tax-Advantaged Ultra-Short Fixed Income||0.20%||0.51%||0.70%||0.78%||0.84%||0.77%||N/A||0.98%|
|75% ICE BofA ML 6-12 mth Muni +25% |
ICE BofA ML 1-3 yr US G.O. Muni*
|Morningstar Cat. Avg.|
|Performance quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than that shown here.
Northern Trust Investments, Inc. has contractually agreed to reimburse a portion of the operating expenses of the Fund (other than certain excepted expenses, i.e., Acquired Fund Fees and Expenses, the compensation paid to each Independent Trustee of the Trust, expenses of third party consultants engaged by the Board of Trustees, membership dues paid to the Investment Company Institute and Mutual Fund Directors Forum, expenses in connection with the negotiation and renewal of the revolving credit facility, extraordinary expenses and interest) to the extent the “Total Annual Fund Operating Expenses” exceed 0.25%. The "Total Annual Fund Operating Expenses After Expense Reimbursement" may be higher than the contractual limitation as a result of the excepted expenses that are not reimbursed. This contractual limitation may not be terminated before July 31, 2018 without the approval of the Board of Trustees. In the absence of fee waivers, yield, total return, growth since inception and dividends would have been reduced. Total return is based on net change in NAV assuming reinvestment of distributions.
*Effective October 2017, ICE data services acquired BofA indices.
|Gross Expense Ratio||Net Expense Ratio‡|
|Tax-Advantaged Ultra-Short Fixed Income||0.26%||0.25%|
|‡Includes contractual expense reimbursements that, if not extended, will end on July 31, 2018. The Fund also includes voluntary expense reimbursements that may change or end at any time.|
|Tax-Advantaged Ultra-Short Fixed Income||0.83%||0.83%||0.35%||0.52%||0.75%|
|75% ICE BofA ML 6-12 mth Muni|
25% ICE BofA ML 1-3 yr US G.O. Muni*
|Morningstar Category Avg. Ultrashort Bond||1.44%||1.41%||0.17%||0.34%||0.49%|
|Performance quoted represents past performance and does not guarantee future results.
*Effective October 2017, ICE data services acquired BofA indices.
|2 - 15 Days||19.8%|
|16 - 30 Days||2.4%|
|31 - 60 Days||5.0%|
|61 - 97 Days||7.6%|
|98 - 180 Days||6.2%|
|181 - 270 Days||5.1%|
|271 Days - 1 Year||7.4%|
|1 - 2 Years||22.8%|
|2 - 3 Years||11.7%|
|3 - 4 Years||0.3%|
|Fixed Rate Note/Bond||58.0%||—|
|Variable Rate Note/Bond||30.7%||—|
|Number of Holdings||394|
|Portfolio Turnover||54.39% (as of 03/31/18)|
|Average Duration†||0.9 YR|
|Average Maturity||282 DAYS|
|Yield to Maturity||1.94%|
|Benchmark||75% ICE BofA ML 6-12 mth Muni +25% ICE BofA ML 1-3 yr US G.O. Muni*|
|Morningstar Category||Ultrashort Bond|
|All data is as of date indicated and subject to change.|
|Bond Risk: Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in price, especially for longer-term issues and in environments of rising interest rates.|
|BofA Merrill Lynch 6-12 Month Municipal Securities Index tracks the performance of U.S. dollar-denominated, investment grade, tax-exempt debt, publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. Qualifying securities must have at least six months and less than 12 months remaining term to final maturity, a fixed coupon schedule, and an investment grade rating (based on an average of Moody's, S&P and Fitch). It is not possible to invest directly in an index.
|ICE BofA Merrill Lynch 1-3 Year US General Obligation Municipal Securities Index tracks the performance of U.S. dollar-denominated, investment grade, tax-exempt, general obligations publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. Qualifying securities must have one to three years remaining term to maturity, a fixed coupon schedule, and an investment grade rating (based on an average of Moody's S&P and Fitch). It is not possible to invest directly in an index.
|Quality Distribution: Credit quality ratings are based on the conservative average of Moody's, Standard & Poor’s and Fitch ratings. If ratings from all three rating agencies disagree, the model assigns the middle rating to the security. If two of the three agree, the model assigns the rating from those two to the security. If none of these three rating agencies has assigned a rating, the Fund will assign a rating of not rated. The ratings, expressed in Standard & Poor's nomenclature, range from AAA (extremely strong capacity to meet its financial commitment) to D (in default). Short-term ratings, expressed in Standard & Poor’s nomenclature, range from A-1 (obligor's capacity to meet its financial commitment on the obligation is strong) to D (in default). Committed Cash includes any traded cash (forward settling trades), the sweep vehicle and commercial paper. The ratings represent the rating agencies' opinions of the quality of the securities they rate. Ratings are relative and subjective and are not absolute standards of quality.|
|*Effective October 2017, ICE data services acquired BofA indices.|
With Northern Trust Since 1985
Began Career in 1985
Patrick D. Quinn, Vice President of Northern Trust and Senior Portfolio Manager in the Ultra Short Fixed Income Group. In addition to his responsibilities managing client accounts, Patrick is the co-Manager of the Northern Tax-Advantaged Ultra-Short Fixed Income Fund.
Prior to his current role, Mr. Quinn was the portfolio manager of Northern Trust's Collective Short Term Investment Fund. He started his investment career in 1985 in Northern's Treasury department, advancing to division manager of the bank's Funding desk. He also held positions as a portfolio manager and risk manager while in Treasury.
Mr. Quinn received a B.S. in management and finance from DePaul University and an MBA in finance from the Kellstadt Graduate School of Business at DePaul University.
With Northern Trust Since 2006
Began Career in 2005
Jason Gookin, Vice President of Northern Trust and Portfolio Manager with the Ultra Short Fixed Income Group. In addition to his responsibilities managing client accounts, Jason is the principal trader for municipal securities for Ultra-Short Fixed Income. Mr. Gookin also co-manages the Northern Tax-Advantaged Ultra-Short Fixed Income Fund.
Prior to joining Northern Trust, Mr. Gookin was a financial advisor with Ameriprise Financial, where he developed financial plans for clients using various computer models and forecasting techniques.
Mr. Gookin received a B.A. in finance with honors from Michigan State University and an MBA from the University of Chicago Booth School of Business with concentrations in finance, economics and international business.
Not FDIC insured | May lose value | No bank guarantee
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