Second Quarter 2021

The Near-Term Tax Free Fund had a total return of 0.22% in the second quarter of 2021, slightly underperforming its benchmark, the Bloomberg Barclays Municipal Bond 3-Year Index, which returned 0.27 percent. See complete fund performance here. Performance data quoted represents past performance, which does not guarantee future results.

The main source of underperformance came from overweight Texas bonds and their school districts. This fund continues to use a barbell strategy which overweighs short and long-term maturities while underweighting medium-term maturities.

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

Strengths

  • The fund’s allocation to maturities outside of the 1-to-5-year maturity range of its benchmark’s weighted maturity of three years, led the performance of the fund, with the 0-to-1-year maturities being the most rewarding.
  • The fund’s overweight allocation to the District of Columbia bonds contributed positively to performance, as they outperformed the benchmark and carried a higher weighting. The fund was underweight California and overweight Washington; they were the second and third, respectively, best performing states for the fund.
  • The fund’s underweight allocation to transportation bonds contributed positively to performance, as they underperformed. The second and third best sectors were our overweight general obligation bonds and overweight water districts.

Weaknesses

  • The fund’s underweight allocation to the 1-to 3-year maturity area of the curve was a detractor as bonds in those maturities underperformed the benchmark.
  • The fund’s overweight allocation to Texas bonds were the largest negatively contributor to performance, as they underperformed the benchmark while carrying a higher weighting. We were also overweight Florida and Illinois bonds which underperformed the benchmark. 
  • The fund’s allocation to school district bonds were the largest detractor to performance, as they underperformed the benchmark and carried a higher weighting. The second and third largest drags on performance were our overweight utilities and overweight single-family housing, respectively.

Outlook

Moody’s Investor Service in March raised their U.S. states and local governments outlook to stable from negative based on stronger state finances and continued economic and fiscal support from the federal government. The ratings service noted tax revenue in most states continues to improve, outpacing expectations. Covid-19 relief of $350 billion has also been allocated to the states to address shortfalls.  While we expect some type of new infrastructure legislation to pass Congress, its magnitude could be significant. Strategists at Bank of America, the largest underwriter of state and local debt, expect municipal yields to continue to fall throughout the second half of 2021, finishing the year about where yields started the year.

 

The Barclays 3-Year Municipal Bond Index is a total return benchmark designed for short-term municipal assets. The index includes bonds with a minimum credit rating BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have a maturity of 2 to 4 years.

Standard Disclosure
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20 percent of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes.

Net Asset Value
as of 09/17/2021

Global Resources Fund PSPFX $6.25 -0.08 Gold and Precious Metals Fund USERX $11.49 -0.10 World Precious Minerals Fund UNWPX $4.44 -0.06 China Region Fund USCOX $8.76 0.11 Emerging Europe Fund EUROX $6.85 -0.09 Global Luxury Goods Fund USLUX $23.83 -0.14 Near-Term Tax Free Fund NEARX $2.25 0.01 U.S. Government Securities Ultra-Short Bond Fund UGSDX $1.99 No Change