Cavanal Hill Money Market Funds Quarterly Commentary
Market Overview
Money market yields average settled around 4.05% after the Federal Reserve’s (the Fed) most recent 25 basis point (0.25%) interest rate cut, in December 2024. The terminal rate also shifted higher during the quarter by 50 basis points (0.50%). That hasn’t stymied the growth in industry assets, which increased to a record $7.3 trillion. This keeps money flowing in the economy and money fund demand for government debt helps keep a lid on short-term debt yields.
Concerning results in economic soft data, including weaker consumer sentiment and business outlook surveys, have yet to translate into hard data, such as the quarterly gross domestic product and monthly payroll numbers, but the Fed’s dual mandates of stable prices and full employment are increasingly coming into conflict.
How are you positing the Fund?
The decreasing likelihood of a Fed policy rate cut allowed us to add duration on Treasury weakness. We will likely seek duration neutrality over the next quarter.
Are there notable changes to the portfolio?
The Cavanal Hill U.S. Treasury Fund increased Treasury holdings to 21.7% at the end of February up from 21% in November 2024. That’s not a notable change in itself but the Fund’s composition changed to 11% of holdings maturing within 6 months from 16%. Agency fixed rate securities increased by 10% to 15.8% in the Cavanal Hill Government Securities Money Market Fund.
Why should investors consider investing in this fund?
Increasing uncertainty regularly brings higher investments in cash products and 2025 has certainly started with plenty of uncertainty. Cash as an asset class is supported by the Fed’s higher for longer view. Alternative like bank deposits and direct investments remain uncompetitive. We believe the Cavanal Hill Money Market Funds will continue to grow, providing safety, liquidity, and yield.
Disclosures
An investor should consider a fund’s investment objectives, risks and charges and expenses carefully before investing or sending money This and other important information about an investment company can be found in the fund’s prospectus. To obtain a Cavanal Hill Funds prospectus or summary prospectus, please call 800-762-7085 or visit us at www.cavanalhillfunds.com. Please read it carefully before investing.
Cavanal Hill Investment Management, Inc. is an SEC registered investment adviser and a wholly-owned subsidiary of BOK Financial Corporation, a financial holding company (“BOKF”). BOKF, NA serves as the custodian for the Cavanal Hill Funds. Cavanal Hill Investment Management, Inc. provides investment advice, administration and other services for the Funds and receives a fee for providing such services as fully described in the prospectus. The Funds are distributed by Cavanal Hill Distributors, Inc. a registered Broker/Dealer, member FINRA and wholly-owned subsidiary of BOKF.
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Commentary provided is for the indicated period and is designed to provide a frame of reference. It does not constitute investment advice. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. The opinions expressed herein reflect the judgment of the authors at this date and are subject to change without notice and are not a complete analysis of any sector, industry or security. This document contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the Cavanal Hill Funds, the securities and credit markets and the economy in general. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “plans,” “projects,” variations of such words and similar expressions are intended to identify such forward-looking statements. Management judgments relating to and discussion of the value and potential future value or performance of any security, group of securities, type of security or market segment involve judgments as to expected events are inherently forward-looking statements. Management judgments relating to and discussion of the value and potential future value or performance of any security, group of securities, type of security, group of securities, type of security or market segment involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what is expressed, implied, or forecasted in such forward-looking statements. The potential realization of these forward-looking statements is subject to a number of limitations and risks, which are described in the Fund’s prospectuses, and investors or potential investors, are cautioned to review the Funds’ prospectuses and the description of such risks. Neither the Funds nor the Funds’ investment adviser, Cavanal Hill, undertake any obligation to update, amend, or clarify forward-looking statement, whether as a result of new information, future events or otherwise.
If you’d like additional information about this or any of the Cavanal Hill Funds, please contact Bill King at 855.359.1898, Bill.King@cavanalhill.com, or cavanalhillfunds.com.
Not FDIC Insured | May Lose Value | No Bank Guarantee