Comparing Three Top Short-Term Government Bond Funds for Steady Portfolio Returns

Short-term government bond mutual funds represent one of the most secure wealth-building instruments for conservative investors seeking reliable income streams with minimal capital risk. Unlike individual government bonds, these funds offer greater stability when integrated into equity-heavy portfolios and distribute dividends on a more frequent schedule. The funds we examine here—Loomis Sayles Ltd Term Govt and Agency (NEFLX), CM Advisors Fixed Income (CMFIX), and SEI Short-Duration Government (TCSGX)—are all recognized as top-performing mutual funds with Zacks Mutual Fund Rank #1 designation.

Understanding Short-Term Government Bond Funds

These specialized mutual funds invest exclusively in obligations of the U.S. federal government and its agencies, with investment horizons typically not exceeding five years. This restricted scope makes them particularly appealing for risk-averse investors who prioritize capital preservation over aggressive growth. Government-backed securities form the foundation of these portfolios, ensuring that principal remains protected while generating steady income.

Three Key Performers in the Category

SEI Short-Duration Government (TCSGX) maintains a focused investment strategy, allocating substantially all its assets to U.S. Treasury obligations and mortgage-backed securities issued or guaranteed by federal agencies. The fund reported three-year annualized returns of 4.7%. As of July 2025, TCSGX maintained approximately 3% of holdings in Federal National Mortgage Association securities. The fund’s objective balances liquidity maintenance with current income generation while safeguarding principal value.

Loomis Sayles Ltd Term Govt and Agency (NEFLX), managed by Clifton V. Rowe since 2001, targets high current returns alongside capital preservation through concentrated government-backed investments. This fund delivered three-year annualized returns of 4.8%, demonstrating consistent performance. The vast majority of NEFLX assets are invested in securities issued or guaranteed by U.S. governmental entities and their agencies.

CM Advisors Fixed Income (CMFIX) operates with a broader mandate, diversifying across undervalued U.S. dollar-denominated fixed-income securities including corporate bonds, government obligations, and mortgage-backed debt instruments. CMFIX achieved the highest three-year annualized returns among the three at 7.9%, reflecting its more flexible investment approach. The fund maintains an expense ratio of 0.87%, which should be considered when evaluating net returns.

Comparative Analysis for Investors

When selecting between these top-performing mutual funds over a longer investment horizon, the choice hinges on individual risk tolerance and income requirements. TCSGX and NEFLX offer maximum security through purely government-backed portfolios, with nearly identical returns around 4.7-4.8%. CMFIX’s enhanced performance at 7.9% reflects its willingness to embrace additional credit risk through corporate bond exposure, making it suitable for investors comfortable with slightly elevated volatility in exchange for higher income potential.

All three funds maintain the highest Zacks rankings, indicating expected outperformance relative to peer funds going forward. For investors prioritizing absolute safety with predictable income, the pure government-backed options remain superior choices. Those seeking maximum yield within acceptable risk parameters may find CMFIX’s diversified approach more aligned with their objectives.