Ultra Short Government Fund : Commentary

Portfolio Managers: Thomas D. Carney, Nolan P. Anderson

As of 3/31/2016

Investment Style: Money Market

The Government Money Market Fund ended the first calendar quarter with a 7-day effective and current yield of 0.15%.

For money market funds and other ultra-short-term investors, the high point of the past fiscal year was the decision by the Federal Open Market Committee (FOMC) of the Federal Reserve to raise the overnight Fed Funds rate (the overnight lending rate between banks, which is controlled by the Federal Reserve) from 0.25% to 0.50% in December of 2015.  This one-quarter-percentage-point move was the first increase in short-term interest rates since 2006.  The FOMC cited continued improvement in labor market conditions and confidence that inflation will rise over the medium term to its 2% objective as principal reasons for raising interest rates.  The FOMC expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.  The FOMC additionally highlighted its expectation that economic conditions will likely evolve in a manner that will warrant only gradual increases in the Fed Funds rate, and that the Fed Funds rate will, for some time, remain below levels expected to prevail in the long run. 

The Fed Funds rate affects all investments within the opportunity set of our Fund.  We invest in ultra-high-quality, short-term investments (e.g., US Treasury bills and government agency discount notes) that have a weighted average maturity of less than 60 days.  As a result, our yield has invariably followed the path dictated by the Federal Reserve’s monetary policy, as we frequently reinvest maturing bills and notes in these short-term instruments.  As of March 31, 95.5% of our portfolio was invested in US Treasury bills, the balance in high quality Wells Fargo money market funds.  The average life of our portfolio at March 31 was approximately 53 days. 

While our Fund’s 7-day and current yields are still very low, it is encouraging to be able to report on the upward yield progress we have made since the Fed’s decision to increase short-term interest rates.  We will maintain our focus on high credit quality, preservation of capital and maintaining liquidity for our investors, as we, hopefully, report on a steadily increasing yield in the quarters to come. 

Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so.  An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.  The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider carefully the investment objectives, risks and charges and expenses of the Fund before investing. The Fund's Prospectus contains this and other information about the Fund and should be read carefully before investing. Portfolio composition is subject to change at any time and references to specific securities, industries and sectors in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk.
Weitz Securities, Inc. is the distributor of the Weitz Funds.