Q:  What are the main differentiators of this fund as compared to other bond funds?

A: Overall, a short-term government bond fund has fewer moving parts than a general bond fund. The main difference is related to the philosophy for stability of the principle and risk aversion. In a general bond fund, you would be buying bonds from highly rated companies such as General Electric or 3M to below investment grade securities and there is always the possibility of a credit event, especially with the tremendous amount of leverage buyouts business in the marketplace currently.

I believe that this has definitely been a risk to the credit markets recently. There’s so much private equity in the marketplace right now and no company is too big to be bought anymore. Different than in the past, there are no longer supposedly safe investments like utilities. For example, Texas Utilities was taken over by a private equity fund through a leverage buyout.

From that standpoint, all other things – like duration and average life - being equal, you should expect greater incremental income from a general bond fund. But you’re also taking greater incremental risk, and some investors aren’t interested in taking any risk.

So it all goes back to the advisor figuring out the risk tolerance of the client and his financial goals. There are investors who know that they will need their money in two or three years because their kids are going to college, for example. That’s why they need a very good idea of how much money they’re going to need in a certain period of time, and that’s where a short-term government fund offers advantages as compared to other instruments.