Northern Trust’s two ultra-short fixed income mutual funds have surpassed US$4 billion in combined assets, as investors continue to seek alternatives to money market funds in a continuing environment of low-interest rates.
As of December 31, 2013, the Northern Ultra-Short Fixed Income Fund (NUSFX) had US$1.45 billion in assets and the Northern Tax-Advantaged Ultra-Short Fixed Income Fund (NTAUX) had US$2.63 billion, with combined assets up 47% from a year earlier.
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Colin Robertson, managing director of Fixed Income for Northern Trust, said: "Our ultra-short strategies continue to grow in size, confirming our view that investors are eager to find lower risk strategies that still offer the potential for some incremental yield. We believe that interest rates will remain low for the foreseeable future, helping our ultra-short funds gain further momentum among investors seeking a total-return strategy."
Both ultra-short mutual funds were launched in 2009 as a complement to Northern Trust’s established cash management and ultra-short duration portfolio management strategies, including more than US$200 billion across institutional and personal client assets.
Ultra-short strategies are an option for investors with an appetite for modest interest rate risk, credit risk, and liquidity risk compared to traditional money market funds.
Carol Sullivan, director of Ultra-Short Fixed Income, Northern Trust, said: "With low interest rates and increased regulatory pressure on money market funds, investors are looking for opportunities to improve yield without taking more than moderate risk in the process. We have been in this business a long time. Northern Trust has decades of separately managed account history in this strategy prior to creating the ultra-short mutual funds. Our emphasis on risk management, credit research, and diversified portfolio construction allows us to manage downside risk as the investment environment changes. In targeting a neutral duration of one year, the ultra-short funds can be part of an investor’s larger fixed income strategy, helping them achieve specific investment goals."
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By GlobalDataThe minimum investment required for each fund is US$2,500. The current net expense ratio for Northern Ultra-Short Fixed Income Fund is .26%, or US$26 for every US$10,000 invested.
The current net expense ratio for Northern Tax-Advantaged Ultra-Short Fixed Income Fund is .25%. According to Morningstar, as of 12/31/2013, the average expense ratio for Ultra-Short Bond Funds is .63%.
It is important to note that the funds are not money market funds, which strive to maintain a US$1.00 net asset value. The share price of the ultra-short funds fluctuates with their returns and the funds are designed to act as an alternative to – not a substitute for – money market fund investments. An investment in either fund could result in a loss of principal.
