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| September 30, 2011 |
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Market participants were once again faced with evaluating the implications of a sovereign debt default in Greece, yet this time had to do so in conjunction with a slowing in the U.S. economic recovery. This resulted in lower Treasury yields and wider credit spreads over the quarter, as riskier securities underperformed in the face of heightened uncertainty.
With the exception of financials, other investment grade sectors of the fixed income markets posted strong, positive returns in the third quarter. U.S. Treasuries had the highest absolute return, in excess of 5.65%, while financials posted the lowest returns, down nearly 2.00%. On an excess return basis (returns adjusted for risk), all investment grade sectors underperformed U.S. Treasuries.
The Munder Bond Fund underperformed its benchmark, the Barclay's Capital Aggregate Bond Index for the quarter ended September 30, 2011. For the quarter, the Fund remained predominantly overweight in corporate bonds, specifically in the financial sector with a focus on insurance, banking and real estate (REIT) companies. Over the quarter, the Fund gradually reduced its holdings in the insurance and banking segments in favor of U.S. Treasuries, but the corporate overweight remained, driving the underperformance. The Fund had no sovereign or banking exposure to peripheral Europe (Spain, Italy, Greece, etc).
From an attribution perspective, the Fund's underweight in U.S. Treasuries and overweight in financial sector exposure were the largest detractors from relative performance. Conversely, its overweight in U.S. mortgage-backed securities was the strongest contributor to relative performance.
Looking forward, we believe that a resolution to the European sovereign crisis is the largest hurdle to be faced in the coming months. Despite the additional possibility of continued slower economic growth in the U.S., we continue to favor non-government holdings that offer attractive yields relative to government securities. |
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| June 30, 2011 |
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Market participants were once again faced with evaluating the potential of a sovereign debt default in Greece, yet this time had to do so in conjunction with a slowing in the U.S. economic recovery. The result was lower U.S. Treasury yields and wider spreads between Treasury and non-Treasury yields over the quarter, as riskier securities underperformed in the face of heightened uncertainty. Adding to the uncertainty was the Federal Reserve’s confirmation that it would be completing the current round of quantitative easing in June, leaving investors to contemplate the impact that may have on the level of interest rates and the shape of the yield curve. Importantly, at the most recent meeting of the Federal Open Market Committee, the policy making arm of the Federal Reserve, members decided to maintain their near zero interest rate policy for an “extended period.”
All investment grade sectors of the fixed income markets posted strong, positive returns in the second quarter. However, in sharp contrast to the first quarter, corporate bonds in the utility sector were the top performing securities, followed by U.S. Treasuries. The weakest performing segments of the market were government agencies, corporate bonds in the financial sector and asset–backed securities.
The Bond Fund performed slightly behind its benchmark, the Barclay’s Capital U.S. Aggregate Bond Index, for the quarter ended June 30, 2011, but remained ahead of its benchmark on a year-to-date basis.
For the quarter, the Fund remained predominantly overweight in corporate bonds, specifically in the financials sector, with a focus on insurance and real estate investment trust (REIT) companies. The Fund had a generally neutral weight in the banking sector, with a focus on domestic institutions. There was no sovereign or banking exposure to peripheral Europe (Spain, Italy, Greece, etc). The only exposure to the core European countries was limited to a German Landesbank (3.3% of the Fund), which carried a direct guarantee from the German government.
From an attribution perspective, the Fund’s financial sector exposure was its strongest contributor to relative performance, due to issue selection. Conversely, its underweight in U.S. government agency and Treasury securities was the strongest detractor from relative performance.
Looking forward, we share the opinion that the economic slowdown and spike in commodity prices experienced during the second quarter was transitory in nature and will be followed by a stronger second half of 2011. With that backdrop, we expect non-government holdings to outperform and would look to opportunistically increase our corporate investment grade and high yield exposure. |
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| March 31, 2011 |
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A flow of stronger economic data in the U.S. appeared to give investors the confidence to embrace risk in the face of several global events that have the potential to negatively impact global growth in the near term. Specifically, political tension in the Middle East and the resulting spike in oil prices, as well as the natural disaster in Japan, could slow economic growth in the coming months due to higher gasoline prices and potential supply disruptions caused by damaged manufacturing facilities in Japan. In spite of this, both stocks and higher risk sectors of the fixed income market posted solid returns in the first quarter. Similar to the prior quarter, U.S. Treasury securities lagged investment-grade securities across all other bond market sectors. In fact, U.S. Treasuries were the only bond market sector to experience a negative total return for the quarter. Commercial mortgage backed securities (CMBS) and corporate bonds in the financial sector were the top performing sectors.
The Munder Bond Fund outperformed its Barclays Capital U.S. Aggregate Bond Index benchmark for the quarter. From a sector perspective, the Fund’s largest contributor to relative performance for the quarter was its overweight in corporate financial bonds. The selection of specific issues within the mortgage-backed and asset-backed sectors also had a significant and positive impact on relative performance. At the end of the quarter, the Fund remained overweight in investment-grade financial and high-yield industrial securities, as well as the non-agency mortgage-backed and subordinated automobile asset-backed segments of the fixed income market.
At the end of the quarter, we were finding the most attractive valuations in BB-rated high yield entities and non-agency mortgage securities. Additionally, we have increased our overweight in the insurance sector. Our strategy is predicated on continued momentum in the U.S. economic recovery, a Federal Reserve that remains accommodative, and a relatively controlled situation in the Middle East. Should our views on any of these issues change, the risk profile of the Fund will be adjusted accordingly. |
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Past performance does not guarantee future results. There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including potential loss of principal. The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus and summary prospectus contain this and other important information about the Fund. To obtain a prospectus and summary prospectus, click here. Read the prospectus and summary prospectuses carefully before investing.
RISKS: 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. A significant portion of the Fund is invested in mortgage-backed securities, which are subject to higher prepayment risk than corporate bonds and notes, particularly in periods of declining interest rates, and are subject to the risk that an unexpected rise in interest rates will extend the life of the security beyond the expected repayment time, typically reducing the security’s value. In addition, the Fund invests in to-be-announced (TBA) and dollar-roll transactions, which involve the risk that the security will decline in value between the purchase date and the delivery or issue date, the risk that the security the Fund is required to buy will be less than an identical security, and the risk that the counterparty will fail to deliver. The Fund also invests in dollar-denominated securities of foreign issuers, which involve additional risks due to foreign economic and political conditions, and differences in financial reporting standards. Derivatives, such as futures contracts, are subject to the risk that small price movements can result in substantial gains or losses.
The Barclays Capital U.S. Aggregate Bond Index is a market-value-weighted index designed to measure the U.S. investment-grade, fixed-rate bond market, which includes publicly issued, fixed-rate, non-convertible, dollar-denominated, taxable U.S. government, corporate, mortgage pass-through and asset-backed securities rated investment grade or higher. You cannot invest directly in an index, securities in the Fund will not match those in an index, and performance of the Fund will differ. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns.
Credit ratings are issued by credit rating agencies and reflect the agency's assessment of the risk of a bond based on the issuer's capacity to meet its financial commitment on the bond. Ratings range from AAA (highest credit quality) to D (in default).
Munder Funds are distributed by Funds Distributor, LLC 01.12
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| Munder Funds distributed by Funds Distributor, LLC. |
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