This analysis delves into the performance and strategic decisions of the Weitz Core Plus Income Fund, focusing on its strong showing in the fourth quarter of 2025 and over the entire year. It examines the factors contributing to its outperformance against key benchmarks, shedding light on the fund's sector allocations and security selections. Furthermore, it provides insights into the fund's market outlook, recent portfolio adjustments, and a comparative overview of its yield and duration against the broader Bloomberg U.S. Aggregate Bond Index. The commentary emphasizes a disciplined approach to managing credit risk while seeking attractive opportunities in a dynamic market environment.
Navigating Fixed Income: A Quarter of Outperformance and Strategic Positioning
Fourth Quarter Triumphs: Surpassing the Benchmark
The institutional share class of the Core Plus Income Fund delivered a robust return of +1.26% during the final quarter, comfortably exceeding the Bloomberg U.S. Aggregate Bond Index, which posted a +1.10% gain. This strong quarterly performance capped an impressive year for the fund.
Annual Excellence: Sustained Outperformance Through Prudent Choices
For the entire year, the Core Plus Income Fund's Institutional Class achieved a commendable return of +7.52%, once again surpassing the index's +7.30%. This consistent outperformance was a direct result of the fund's strategic allocation across various sectors and its meticulous selection of individual securities. Notably, the fund's exposure to securitized products, which lie outside the traditional benchmark, played a significant role in enhancing returns, as did astute picks within the high-yield corporate bond segment.
Treasury Market Dynamics: A Boost from Declining Rates
The broader U.S. Treasury market experienced its most favorable year since 2020. This positive trend was predominantly fueled by a decline in interest rates, particularly impacting maturities of ten years and shorter. This environment provided a tailwind for fixed-income investments, including portions of the Core Plus Income Fund's holdings.
Cautious Credit Stance: Prioritizing Quality Amid Tight Spreads
The fund maintains an underweight position in credit risk and an overweight allocation to agency mortgage-backed securities (MBS) and U.S. Treasuries. This reflects a cautious approach, given the historically tight credit spreads observed in the market. The strategy underscores a preference for high-quality, liquid assets that offer resilience in uncertain economic conditions.
Strategic Portfolio Adjustments in Q4 2025: Seizing Opportunities
During the fourth quarter of 2025, the fund actively adjusted its portfolio. It increased its allocation to corporate bonds by 180 basis points and to asset-backed securities (ABS) by 150 basis points. These adjustments were driven by opportunities identified in specialty retail and consumer finance sectors, as well as a focus on relative value in ABS compared to short-duration corporate bonds. These tactical shifts demonstrate the fund's ability to adapt and capitalize on market inefficiencies.
Yield and Duration Advantage: Higher Income, Lower Sensitivity
The Core Plus Income Fund exhibits a yield to worst of 5.3%, significantly higher than the Bloomberg Agg's 4.3%. Furthermore, the fund maintains a shorter duration at 5.4 years, compared to the index's 5.9 years. This strategic positioning provides the fund with the dual benefits of higher income generation and reduced sensitivity to interest rate fluctuations, making it an attractive option for investors seeking both yield and stability.
