Market Sector Update

• U.S. Treasuries remained relatively range bound during second quarter 2020, with volatility far more muted than the prior period. The 10-year yield ended the quarter down 5 basis points from the first quarter.
• The Federal Reserve (Fed) initiated their authority to purchase up to $750 billion of corporate issuance through three different facilities to provide support to bond markets. The announcement – and quick establishment – of using exchange traded funds (ETFs) created record inflows into corporate bond ETFs, as investors tried to “front-run” the Fed action.
• Economic measures, while largely down, surpassed most estimates during the quarter and provided further hope of a “V” shaped recovery.

Portfolio Strategy

• A passively managed index fund, the Fund had a positive return and performed in line with its benchmark for the quarter.
• All maturities were up with intermediate duration outperforming. In addition, all 11 sectors were positive for the quarter, led by information technology and health care.
• Investment grade corporate spreads tightened significantly for the period, as all credit tiers bounced back the wider spreads in first quarter.
• Total issuance of investment-grade corporate bonds set an all-time record during the quarter as corporations took advantage of strong demand.

Outlook

• The Fed continues to backstop as much of the corporate credit market as possible. The Secondary Market Corporate Credit Facility has turned its focus from supporting bond ETFs to now buying issues directly.
• Potential downgrades and fallen angel risks have elevated. Corporations may struggle to maintain current credit ratings if further hits to operating cash flows materialize as projected.
• Demand for high quality corporates bonds is likely to continue as investors will seek those issuers with solid fundamentals, strong balance sheets and relatively low leverage.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The S&P 500® /MarketAxess® Investment Grade Corporate Bond Index seeks to measure the performance of corporate debt issued in the U.S. by S&P 500 companies. It is a market value-weighted subset of the S&P 500 Investment Grade Corporate Bond index that seeks to measure the performance of corporate debt issued in the U.S. by companies (and their subsidiaries in the S&P 500), subject to additional liquidity rules. Indexes are unmanaged and one cannot invest directly in any index.

The Fund is a passively managed index fund designed to track the performance of its stated benchmark index. It does not invest in securities based on the managers' view of the investment merit of a particular security or company, nor does it conduct conventional investment research or analysis or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities that, in combination, provide exposure to its respective benchmark Index without regard to market conditions, trends or direction.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. As of November 30, 2018, the index was concentrated in the financial industry group; therefore, the Fund is subject to the same risks faced by companies in the financials industry to the same extent as the index is so concentrated. Such risks include extensive government regulation, fluctuation of profitability, and credit losses resulting from financial difficulties of borrowers. A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.