The fund managers will be responding to a selection of questions on a weekly basis. The answers to these questions will be posted here every Friday. Please re-visit this page to read their answers.
Q: How do you define “duration”?
Maturity (as maturity increases, duration also increases and the bond’s price becomes more sensitive to interest rate changes).
Coupon rate (bonds with high coupon rates will tend to have a lower duration than bonds that pay low coupon rates, as a bond paying a higher coupon means the investor receives more of their money back at a faster rate).
Interest rates (as overall interest rates increase, duration decreases and the bonds become less sensitive to further rate changes).
Q: What defines a short duration bond?
The short duration maturity profile differs slightly across fixed income markets - within the US or European credit markets short duration is likely to be considered as bonds maturing or being called within the next three years. In some markets however (sterling and emerging markets for example), we define this as a bond maturing within the next five years, in order to access an optimal level of market depth and diversification.