Metwest High Yield Bond Fund

Quarterly Commentary

Market Review: “What is it that you would like me to do, sir?”

Having foreshadowed a willingness to renew monetary accommodation as early as January of this year, perhaps the Fed could be lauded for holding off action until the third quarter against the withering criticism from the President and intermittently volatile markets. But capitulate it finally did, not once but twice, with an ease of 25 basis points in September to follow one in late July, which had marked its first cut since 2008. What was notable in the redirection of policy, as highlighted by the latest meeting minutes, was a lack of consensus versus the past, underscoring uncertainty (and dispersion of opinion) among the FOMC members. The broader viewpoints suggest increased risk of policy error, particularly in the face of unrelenting political pressure. However, it wasn’t as if the more dovish faction was without support for its perspective: since the start of the year, trade tension and its fallout disaffected economic measurables in a meaningful way. As a result, global recessionary concerns mounted in the third quarter, particularly in Europe where the IHS Market Eurozone composite PMI, which captures both manufacturing and services activity, fell to 50.4 in September, the lowest reading since June 2013, and German manufacturing PMI fell to a 10-year low. Trade concerns have taken a toll on U.S. manufacturing as well, with the PMI here falling into contraction territory for the first time in three years. Not surprisingly, businesses remain skeptical of the prospective environment, as evidenced by sharp declines in survey-based measures of expectations, confidence, and spending decisions...

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Bloomberg Barclays U.S. Corporate High Yield Index 2% Issuer Cap – An unmanaged index that covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. The index limits exposures to a specific issuer to a maximum 2% by market value.

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Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal.

High yield investments by the Fund in lower-rated and non-rated securities presents a greater risk of loss of principal and interest than higher-rated securities. The Fund may also not be suitable for all investors due to its use of sophisticated investment instruments such as derivatives.

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