Complement core income strategies with an active fund recognized for long-term performance

Performance update

Fund outperforms amid declining rates

• Investor risk aversion and U.S. Federal Reserve policy led to declining interest rates across the yield curve in the third quarter.
• Positions targeting prepayment risk and investments in commercial mortgage-backed securities fueled the fund’s relative outperformance. Interest-rate and yield-curve positioning slightly detracted.
• We believe the Fed will cut rates once more this year and will continue to assess whether further reductions are needed.

What was the fund’s investment environment like during the third quarter of 2019?

The U.S.–China trade conflict, slowing global growth, and fears of a recession injected volatility and risk aversion into the market for risk assets the past three months. That said, expectations that the Federal Reserve would maintain an accommodative monetary policy helped offset fears about economic growth and skepticism that the U.S.–China trade dispute will be resolved soon. The Fed cut its target for short-term interest rates by a quarter percentage point twice during the period, its first reductions in more than a decade. The rate cuts are part of an effort to keep borrowing cheap, credit widely available, and businesses and consumers confident.