September was a tale of two halves. Yields moved lower to begin the month as Treasuries rallied across the curve. Fiscal issues in the U.K. and France brought in buyers of longer U.S. debt, coupled with a more generous outlook on the current domestic deficit picture. Nonfarm payrolls arrived weaker than expected, and jobless claimed jumped more than anticipated. Meanwhile, core CPI for August rose 0.3%, which was in line with projections, while the headline reading was higher than thought. Manufacturing data was weaker as well.
The Fed cut rates 25 bps at its mid-month meeting, accompanied by fewer dissents and a more dovish statement. However, Chair Powell’s press conference surprised to the hawkish side, which pushed rates higher in the second half of September. Powell said that there hadn’t been any kind of widespread support for a 50 bps cut and labeled their current action as a “risk management cut.” Additionally, he justified the Fed’s latest action due to the shift in the balance of risks, as employment has softened, but also noted that inflation has moved up and remains somewhat elevated. Market participants largely felt that Powell didn’t clearly explain the thinking behind the committee’s September decision. The median expectation is for two more cuts in 2025.
In Short Term Bond Fund, we remain focused on core objectives: enhancing yield characteristics while maintaining a high standard of credit quality. We've capitalized on attractive entry points in AAA-rated agency mortgage securities, and the recent spread tightening has validated this allocation. We’ve also added exposure to higher-coupon corporates from well-established issuers, reinforcing the portfolio’s income profile. In the face of ongoing trade and tariff uncertainty, our emphasis has remained on these short-duration corporate bonds, which tend to be less sensitive to spread volatility than longer-dated issues. Liquidity has also improved meaningfully, as asset-backed security holdings have declined by 67% since year-end. The fund’s duration remains in line with peers in the short-term bond category, preserving interest rate discipline.
September proved to be a month of contrasts for the U.S. bond market. Early on, Treasury yields declined, driven in part by international demand. Fiscal strains in the U.K. and France led investors to favor longer-dated U.S. debt, and an improved outlook on the U.S. fiscal deficit added support. Economic data also leaned soft. Nonfarm payrolls came in below expectations, and jobless claims were higher than forecast. Inflation data showed core CPI rising 0.3% in August, matching estimates, while the headline figure surprised slightly to the upside. Manufacturing indicators weakened in addition.
At its mid-September meeting, the Federal Reserve delivered a 25-basis-point rate cut, framing it as a “risk management cut” amid shifting economic conditions. The post-meeting statement tilted dovish, and there were fewer dissenting votes. However, Chair Powell’s press conference sent a more hawkish signal, noting limited support for a deeper 50-basis-point cut and emphasizing that inflation remains somewhat elevated, even as labor market data begins to soften. The market reaction was direct, as yields reversed course and moved higher in the latter half of the month. Many investors felt Powell’s messaging lacked clarity on the Fed’s rationale, though the consensus still points to two additional cuts expected in 2025.
Multi-Sector Bond Fund remains positioned for the current environment through targeted exposure to rate-sensitive assets, such as agency mortgages, which have benefited from recent spread tightening, and extended-maturity investment grade credit. The portfolio continues to prioritize high-quality holdings, offering a degree of defense amid increasingly soft economic fundamentals. Our high yield allocation is focused on shorter maturities from established issuers, striking a balance between income generation and disciplined risk management. A key focus this year has been boosting coupon income, which has helped shape a return profile that is more stable and less reliant on interest rate moves. Additionally, liquidity has also been significantly improved. We've reduced asset-backed holdings by more than 75% and increased cash reserves to allow for tactical flexibility as monetary policy evolves and a softer economy presents potential opportunities. The fund's duration remains comfortably in line with peers in its category.
Past Performance is no guarantee of future results.
The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted above. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that investor's shares, when redeemed, may be worth more or less than their original cost. For performance information current to the most recent month-end, please call toll-free 800-544-6060
Sources: Yorktown Management & Research Co., Bloomberg.
All estimates use daily fund pricing and Yorktown's standard credit quality evaluation method.
Definition of Terms
United States Treasury (UST) - the national treasury of the federal government of the United States where it serves as an executive department. The Treasury manages all of the money coming into the government and paid out by it.
Asset-Backed Security (ABS) - An asset-backed security is an investment security --a bond or note --which is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables.
Collateralized Loan Obligation (CLO) - A collateralized loan obligation is a single security backed by a pool of debt.
Basis Points (bps) - refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument.
Option-Adjusted Spread (OAS) - The measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is then adjusted to take into account an embedded option.
Yield to Worst - Lowest potential bond yield received without the issuer defaulting, it assumes the worst -case scenario, or earliest redemption possible under terms of the bond.
High Yield (HY) - high-yield bonds (also called junk bonds) are bonds that pay higher interest rates because they have lower cre dit ratings than investment-grade bonds. High-yield bonds are more likely to default, so they must pay a higher yield than investbonds to compensate investors.
Investment Grade (IG) - an investment grade is a rating that signifies that a municipal or corporate bond presents a relatively low risk of default.
London InterBank Offered Rate (LIBOR) - a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
Secured Overnight Financing Rate (SOFR) - a benchmark interest rate for dollar-denominated derivatives and loans that is replacing the London interbank offered rate (LIBOR).
MOVE Index - The ICE BofA MOVE Index (MOVE) measures Treasury rate volatility through options pricing.
The funds are distributed by Ulitmus Distributors, LLC. There is no affiliation between Ultimus Fund Distributors, LLC and the other firms referenced in this material.
This information is for use with concurrent or prior delivery of a fund prospectus. Investors should consider the investment objective, risks, and charges and expenses of the Fund(s) before investing. The prospectus contains this and other information about the Fund(s) and should be read carefully before investing. The prospectus may be obtained at the link above or by calling 1-800-544-6060.
Per the most current prospectus, (1) Fund total operating expense ratios are: Class A, 0.80%; Class L, 1.45%; Institutional Class, 0.80%. (2) In the interest of limiting expenses of the Fund, the Adviser has entered into a contractual expense limitation agreement with the Trust, effective May 31, 2025, so that the Fund’s ratio of total annual operating expenses is limited to 0.79% for Class A Shares, 1.44% for Class L Shares, and 0.79% for Institutional Class Shares until at least May 31, 2026.
As of the most recent prospectus, the operating expense ratios for the Yorktown Multi-Sector Bond Fund are as follows: Class A, 1.19%; Class L, 1.69%; Institutional Class, 0.69%. The Fund does not use fee waivers at this time.
The fund itself has not been rated by an independent rating agency. Ratings (other than U.S. Treasury securities or securities issued or backed by U.S. agencies) provided by Nationally Recognized Statistical Rating Organizations (NRSRO's) including Standard & Poor's, Moody's, Fitch, Kroll, Morningstar DBRS, A.M. Best, and Egan-Jones. This breakdown is not an S&P credit rating or an opinion of S&P as to the creditworthiness of such portfolio. This breakdown is provided by Yorktown Management & Research. When calculating the credit quality breakdown, the manager selects the middle rating when three or more rating agencies rate a security. When two agencies rate a security, the higher of the two ratings is used, and one rating is used if that is all that is provided. A rating of BB and below would represent below investment-grade. Ratings apply to the credit worthiness of the issuers of the underlying securities and not the fund or its shares.
Ratings may be subject to change.
Investing involves risk, including loss of principal. There is no guarantee that this, or any, investment strategy will succeed. Fixed income investments are affected by a number of risks, including fluctuation in interest rates, credit risk, and prepayment risk. In general, as prevailing interest rates rise, fixed income securities prices will fall. Diversification does not ensure a profit or guarantee against loss.
1 Includes Structured Notes, Preferred, and Corporate Bonds not rated by a Nationally Recognized Statistical Rating Organizatio n (NRSRO).
2 Duration measures the sensitivity of the price (the value of principal) of a fixed -income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. Spread duration is the sensitivity of the price of a security to changes in its credit spread. The credit spread is the difference between the yield of a security and the yield of a benchmark rate, such as a cash interest rate or government bond yield.
3 Rating Sensitive, Component, and Step-Up Bonds.
4 Weightings subject to change.