Short-Term Government Fund

Overview

Objective

Seeks current income consistent with preservation of principal.

Strategy

Invests primarily in U.S. Government securities and government mortgage-backed securities.

Fund Manager

Scott Colbert, CFA
  • Joined Commerce in 1993
  • 30 years of experience
  • Fund manager since Fund inception

Risk/Return

LOW - • - - - - - HIGH

In general, greater returns
are associated with greater risks.
The Short-Term Government Fund's net asset value and yield are not guaranteed by the U.S. Government or by its agencies, instrumentalities or sponsored enterprises.

Fund Statistics

Inception Date 12/12/94
Ticker Symbol CFSTX
Cusip 200626109
Minimum Initial Investment $1,000

Commentary

As the global COVID-19 pandemic worsened, economic activity has suddenly slowed. While fourth quarter 2019 Gross Domestic Product (GDP) was 2.1% and followed a strong February 2020 employment report, March economic data was dire. Over 10 million workers filed for unemployment benefits in March. Economists expect annualized GDP to decline10%-40% in the second quarter, accompanied by an unemployment rate as high as 15%. Consensus is for a rapid second half rebound in GDP.

The Federal Reserve (Fed) moved aggressively to provide liquidity to financial markets. The federal funds rate was cut to a target range of 0% - 0.25% in two unscheduled decisions in March. The Federal Reserve began quantitative easing with purchases of U.S. Treasuries and mortgage backed securities.

U.S. Treasury rates moved sharply lower over the first quarter. The 5 Year Treasury fell to .38% from 1.69% at the beginning of the quarter.

For the first quarter, the Commerce Short Term Government Fund’s return of 2.07% underperformed the Bloomberg Barclays 1-5 Year Government Index return of 3.77%. The Fund’s shorter duration relative to the benchmark detracted from performance. The Fund’s relative overweight to mortgage-backed securities contributed to performance.

Unprecedented intervention by the Fed and by Congress through the $2.2 trillion CARES Act give hope that, while severe, we believe this economic downturn will be short and followed by a rapid recovery.

Total Fund Assets as of 3/31/2020 $63,029,673
Net Asset Value1 $17.30
Effective Duration2 2.14 Yrs.
Footnotes:
1. The Net Asset Value represents the assets of the fund (ex dividend) by the total number of shares.
2. Duration is the method determining a bond's price sensitivity, given changes in interest rates.
3. The composition of the portfolio is subject to change in the future.

Portfolio Holdings

Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. When interest rates rise, the prices of bonds and therefore the value of fixed income mutual fund shares can decrease and an investor can lose principal value. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund's shares. Mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility.

Holdings and allocations shown are unaudited, and may not be representative of current or future investments. Holdings and allocations may not include the Fund's entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

Commerce Short-Term Government Holdings

April 2020*
May 2020*
June 2020*

A prospectus for the Commerce Funds containing more complete information may be obtained by calling 1-800-995-6365 or by downloading it from this website. Please consider a Fund's objectives, risks, and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

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