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President's Message
Dear Fellow Shareholder:
The first half of 1999 was an active period for both the financial markets
and The Managers Funds. The U.S. economy continued to grow as low levels
of unemployment and healthy stock market returns have enabled consumers to
expand their spending habits. This is a major factor in the economy's
strength.
In addition, a rebound in some of the emerging economies, particularly in the
Far East has had a positive effect on U.S. businesses prospects for export
growth.
While these factors have driven stock prices higher so far this year, they
have also raised the probability of price inflation. Early in the year,
Federal Reserve Chairman Alan Greenspan noted the strength and publicly
questioned the suitability of the third interest rate cut in late 1998. Then,
at its May meeting, the Federal Reserve Board (the "Fed") changed
its policy bias from neutral
to tightening, sighting "the persistent strength in domestic demand, the
reduced risks of economic weakness abroad, and the recovery in U.S. financial
markets."
Finally, in a widely anticipated move at the end of June, the Fed voted to
increase
short-term rates by 25 basis points (0.25%) to 5.0%. As a result of all
of these factors, interest rates rose throughout the first half, and thus, bond
prices moved lower in general. The yield on 5-year treasury notes rose more
than
one full percentage point during the six months ended May 31, 1999.
Although prices for below investment grade bonds bucked this trend as investors
confidence in the respective companies improved with the perceived improvement
in
the global economy, many high quality and government bonds had negative
total returns for the period. Short-term bonds, treasury bills and commercial
paper, however, are far less interest rate
sensitive and thus provided steady returns throughout the period. For the
six months
ended May 31, 1999, the Managers Money Market Fund returned 2.32%.
Meanwhile, an index of 3-month treasury bills returned 2.22%, and the return
for
the IBC All Taxable Money Fund Average (an index compiled by IBC
Financial Data Corp. which serves as an appropriate benchmark for the Fund)
was 2.17%.
Changes in the portfolio's maturity positioning along with the
manager's changes in asset mix added marginally
to the overall performance during the period. Early in the year the
management team at J.P. Morgan maintained the Fund's average maturity near the
maximum target range of 60 days in order to take advantage of a steep yield
curve
and in the belief that the Fed would wait until mid-year before raising rates.
In
case there was an increase in rates, they utilized a bar-bell maturity
structure
and
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maintained a large position in floating rate notes. Throughout the
second quarter the manager reduced the portfolio's average maturity in
anticipation of the Fed's rate hike. On May 31, 1999, the Fund's average
maturity was
54 days while the average maturity for the IBC All Taxable Money Fund
Average was 60 days. The manager continued shortening the average maturity
throughout June and plans to maintain this position (in the low to mid 40-day
range) for the near future. The portfolio continues to hold a large portion
of floating rate notes and domestic commercial paper.
The accompanying chart provides a breakdown of the portfolio as of May
31, 1999.
As of May 31, 1999, the 30-day average annualized yield for the
Fund was 4.50%. For comparison, the 30-day average yield for the IBC All
Taxable Money Fund Average for the same period was 4.29%. The average
seven-day simple yield for the IBC All Taxable Money Fund Average was 4.35% on
June 30, 1999, and the seven-day compound
yield was 4.44%. The simple and compound yields for the
Managers Money Market Fund for the same period were 4.61%, and 4.71%,
respectively.
Not only has the Managers Money Market Fund performed within
expectations, many of our fixed-income and equity mutual funds have had a
successful first half of 1999. Please see page 3
for the performance results of all of our funds.
Last but certainly not least, Robert Watson, our founder and president
retired from The Managers Funds on April 1, 1999. I would like to take this
opportunity to personally thank Bob for creating a first rate product for our
shareholders
as well as assembling a top quality team of people to support our shareholders
in
The Managers Funds. Importantly, Bob will remain on the Funds' Board of
Trustees and will thus continue to be involved
with The Managers Funds.
As always, should you have any questions on this report, please feel
free to contact us at 1-800-835-3879, or visit our website at
www.managersfunds.com.
We thank you for your continued investment in The Managers Funds.
Sincerely,
/s/ Peter M. Lebovitz
Peter M. Lebovitz
President
