NOTICE: 2019 Capital Gains Available. View PDF here.

Money Market Funds Commentary

4Q 2019

This commentary addresses the Cavanal Hill U.S. Treasury Fund and Government Securities Money Market Fund:

How did you position your portfolios during the quarter?

In late October, the Federal Reserve Open Market Committee (FOMC) lowered the federal funds target range 25 basis points (0.25%) to 1.50% - 1.75%, its third quarter-point cut in three months and then signaled that it would likely be on hold.

As it became clear that the FOMC would keep rate movements on hold, opportunities for yield enhancement in our money market funds were few. However, we extended weighted average maturities somewhat by purchasing some slightly longer-term securities in order to help lock in higher yields.**

The classic money market fund value proposition is “safety, liquidity and yield”, and our efforts were focused on maximizing value in all those areas.

Secured overnight financing rate based floating rate notes1 added value in the Government Securities Money Market Fund, as they typically yield a bit more than overnight repurchase agreements (repo). In the US Treasury Fund, a Treasury Bill-based floating-rate note boosted yield.**

Massive intervention by the Federal Reserve Board (the Fed) in the form of overnight and term repo operations prevented the sort of spike in the repo market that we observed in September. By purchasing Treasury securities, the Fed flooded the financial system with cash. At year-end, the Fed made close to $500 billion available to primary dealers, keeping a lid on year-end volatility in that important market. For the quarter, the Government Securities Money Market Fund’s Institutional share class returned 0.36%, compared with the 0.35% return of the Lipper Institutional U.S. Government Money Market Index. The U.S. Treasury Money Market Fund’s Institutional share class returned 0.36% for the period, compared with the 0.35% return of the Lipper Institutional U.S. Treasury Money Market Index.**

What is your outlook, and how are you positioning the funds?

With the federal funds futures market currently pricing in only one rate cut in 2020, which isn’t likely to happen, if at all, until mid-year or later, fund yields may not change much for some time.

We continue to closely monitor the market’s perception of future FOMC moves, and we look for opportunities to lock in longer-term rates as we feel the short-term momentum is toward lower levels. We are also open to adding additional floating-rate notes if we feel the levels are attractive.**

Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. To obtain performance information current to the most recent month end, call 800-762-7085 or visit us at www.cavanalhillfunds.com.

**
Portfolio composition is subject to change

Past performance is no guarantee of future results.

*

Lipper The Lipper Mutual Funds Average is an equally weighted average of the mutual funds within their respective Lipper classification, adjusted for reinvestment of capital gains distributions and income dividends. Lipper does not guarantee the accuracy of this information. More information is available at www.lipperweb.com. Thomson Reuters Copyright 2020, All Rights Reserved.

1

Definitions

The Secured Overnight Financing Rate (SOFR) was originally known as the broad Treasuries financing rate, the secured overnight financing rate is a measure of the cost of borrowing cash on an overnight basis in the U.S. Treasury repo markets. It is the U.S. successor to Libor. 

2
The 7-day yield or 7-day effective yield refers to the income generated by an investment in a fund over a 7-day period. The 7- and 30-day effective yields also assume that income earned from the fund’s investments is reinvested and generating additional income. The yield quotation more closely reflects the current earnings of the Fund than the total return quotations.

This material must be preceded or accompanied by a current prospectus. An investor should consider the fund’s investment objectives, risks, and charges and expenses carefully before investing or sending any money. This and other important information about the investment company can be found in the fund’s prospectus or summary prospectus. To obtain more information, call 1-800-762-7085, or visit our website at www.cavanalhillfunds. com. Please read the prospectus or summary prospectus carefully before investing.

Cavanal Hill Investment Management, Inc. is an SEC registered investment adviser and a wholly-owned subsidiary of BOKF, NA, 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. SEC registration does not imply a certain level of skill or training. Bank of Oklahoma and its affiliates Bank of Arkansas, Bank of Albuquerque, Bank of Texas, Bank of Arizona, Mobank and Colorado State Bank and Trust offer investment management and administrative services nationally and administer more than $35 billion in assets for numerous clients, including foundations and endowments, and high-net-worth individuals.
Commentary provided is for the period ended 12/31/2019 and is designed to provide a frame of reference and 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 forwardlooking 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 and are inherently forward-looking statements. These statements are not guarantees of future performance and 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 Funds’ 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 statements, whether as a result of new information, future events or otherwise.

MUTUAL FUNDS AND OTHER INVESTMENTS: NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE

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