Guggenheim Strategy Fund II Reports Strong Asset Allocation and Optimized Performance

Despite underperforming its primary benchmark, the fund displayed robust returns driven by credit allocation and market resilience.

December 02, 2024

Key Financial and Operational Highlights

Guggenheim Strategy Fund II released its annual shareholder report, shedding light on its performance, strategy, and portfolio changes for the fiscal year ending September 30, 2024. The fund achieved a noteworthy annual return of 8.11%, though it fell short of the Bloomberg U.S. Aggregate Bond Index, which posted a return of 11.57%. The performance, however, surpassed the Bloomberg 1–3 Month U.S. Treasury Bill Index, which yielded 5.52%.

Portfolio Performance and Benchmark Adjustments

The fund's allocation strategy played a pivotal role in its performance. Credit positioning, structured credit allocations, and earned income contributed significantly. Optimism in market conditions, particularly regarding inflation trends and resilient economic indicators, boosted asset prices. The fund also revised its broad-based securities market index from the Bloomberg 1–3 Month U.S. Treasury Bill Index to the Bloomberg U.S. Aggregate Bond Index to align with regulatory requirements, ensuring representation of the overall market.

Asset Distribution and Investment Focus

With net assets totaling approximately $306 million, the fund's diverse allocation strategy encompassed 241 portfolio holdings. These spanned corporate bonds, asset-backed securities, collateralized mortgage obligations, and other structured financial products. Notable holdings included BCC Middle Market CLO LLC, Wells Fargo & Co., and JP Morgan Chase Commercial Mortgage Securities Trust.

Asset-backed securities and collateralized mortgage obligations accounted for 25.2% and 20.7% of net assets, respectively. A robust emphasis on diversified sectors like financials, non-cyclicals, and industrials demonstrated a strategic approach to balancing growth and risk.

Ten-Year Historical Context

Over the past decade, the fund delivered an average annual return of 2.83%. This performance consistently outpaced its secondary benchmark, demonstrating the long-term viability of its investment strategies, though it lagged behind the primary Bloomberg U.S. Aggregate Bond Index in shorter time horizons.

Operational Efficiency and Financial Health

The fund maintained low operational expenses, reporting zero advisory fees, which underscores its cost-efficient approach. The portfolio turnover rate was 36%, highlighting an active but prudent management style. Audit-related expenses increased slightly, reflecting comprehensive compliance and governance measures.

Forward Outlook and Strategic Adjustments

The management team signaled optimism, driven by resilient credit markets and strategic credit allocation. They highlighted the potential for steady returns underpinned by improved market dynamics and a diversified investment approach.