Aston Funds

Aston/McDonnell Municipal Bond Fund - N Class (CHTMX)

Fund Profile Fact Sheet PDF

Fund Commentary

Market Commentary as of 3/31/08

Market turmoil continued unabated during the first quarter in the face of the ongoing credit crisis and the selling of massive positions of a rogue trader in Europe. Although the Federal Reserve Board responded aggressively by cutting interest rates a total of 2 percentage points, the chaos spread to the municipal market as huge hedge fund liquidations drove munis to their cheapest valuations in decades relative to US Treasury bonds. Rapid deterioration of monoline insurance companies also wreaked havoc on short-term securities, leading to widespread failures in the Auction Rate Securities Market that left investors unable to exit positions.

Credit fears remained a dominant concern for investors worldwide. All of the major bond spread sectors continued to underperform Treasuries during the quarter. The yield curve steepened markedly with the differential between the 2- and 30-year Treasury bonds widening by 130 basis points during the period. Global equity markets were also sharply lower, and the dollar weakened against most major currencies.

Against this backdrop, the Fund's emphasis on higher credit-quality aided performance as a general 'flight-to-quality' drove relative valuations in the muni market. More specifically, exposure to the pre-refunded sector contributed positively to performance. In addition, an overweight stake in the Hospital sector rebounded from year-end. Overall, the portfolio's modest duration overweight and bias toward the 7- to 10-year part of the yield-curve helped performance as intermediate yields fell.

As we enter the second quarter, investor expectations are for another rate reduction from the Fed. Spread markets have begun to tighten, with buyers from the sidelines tempted by the attractive valuation levels reflected in most markets versus Treasuries. Despite uncertainty in the credit outlook, current valuations are providing an ample cushion in the view of many participants. The ultimate impact of the credit market meltdown on the real economy is likely to continue to evolve as the year moves forward. We are of the current opinion that while the contraction of liquidity will restrain future growth, the aggressive steps taken by the Fed combined with the fiscal stimulus package should ameliorate much of the negative impact.

McDonnell Investment Management
Oakbrook, IL

Note: Interest income is generally exempt from federal taxes but may be subject to state and local taxes. For some investors, interest income may be subject to the federal Alternative Minimum Tax. Fixed income funds are subject to interest rate risk. The value of a fixed income fund will decline as interest rates rise.

The views expressed above are for informational purposes only and is not intended as investment advice. Since the date of the commentary, economic, market conditions and the portfolio manager's views may have changed.

As the fund is actively managed, the securities as presented do not represent the current or future composition of the portfolio.

A portion of income may be subject to some state and/or local taxes, and for certain investors, it may be subject to the federal Alternative Minimum Tax.

Past performance does not guarantee future results. Investment return and principal value of mutual funds will vary with market conditions, so that shares, when redeemed, may be worth more or less than their original cost.