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A short-term government bond mutual fund is limited by its investment objectives and fund bylaws to invest primarily in short-term obligations of the federal government or its agencies. Depending on the fund’s definition, the short term can be up to five years.
Mutual funds investing in government debt securities are among the most secure investment options that provide regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to a portfolio with a large proportion of equity. They provide dividends more frequently than individual bonds. Hence, these are considered the safest in the bond fund category and are ideal options for risk-averse investors.
Below, we share with you three top-ranked short-term government bond mutual funds, viz., GMO US Treasury GUSTX, SEI Short-Duration Government TCSGX, and Loomis Sayles Ltd Term Govt and Agency NEFLX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
GMO US Treasury fund invests most of its net assets in Direct U.S. Treasury Obligations and collateralized repurchase agreements that include U.S. Treasury bills, bonds and notes and other securities issued by the U.S. Treasury, as well as Separately Traded Registered Interest and Principal Securities and other zero-coupon securities. GUSTX advisors seek to maintain an estimated interest rate duration of one year or less.
GMO US Treasury has three-year annualized returns of 3.7%. Tracey Keenan has been one of the fund managers of GUSTX since 2017.
SEI Short-Duration Government fund seeks to preserve principal value and maintain liquidity while providing current income. TCSGX invests most of its assets in U.S. Treasury obligations and obligations issued or guaranteed as principal and interest by agencies or instrumentalities of the U.S. government, including mortgage-backed securities and repurchase agreements collateralized by such obligations.
Sei Daily Income Trust Short-Duration Government Fund has three-year annualized returns of 1.3%. TCSGX has an expense ratio of 0.48%.
Loomis Sayles Ltd Term Govt and Agency fund seeks a high current return consistent with preservation of capital. NEFLX invests most of its assets in investments issued or guaranteed by the U.S. government, its agencies, or instrumentalities.
Loomis Sayles Ltd Term Govt and Agency has three-year annualized returns of 1.2%. As of June 2024, NEFLX had 19.2% of its assets invested in Miscellaneous Bonds.