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To shorten or not to shorten (duration)

15 March 2019 | Portfolio construction

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Against a backdrop of rising interest rates in many developed economies, many investors are switching their asset allocation to shorten duration within significant parts of their fixed income allocation.

In this short note, Kunal Mehta studies the impacts of implementing this decision across an investor’s fixed income allocation. He considers four main areas:

  1. The expectation of interest rates moves versus reality
  2. The difficulty in predicting interest rate moves
  3. The role of fixed income within a broadly diversified portfolio
  4. Does short duration offer lower volatility?

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Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority

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