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Authors:
Jed Petty, CFA

Director of DC Strategies

Diana Dengo, CFA

Portfolio Specialist

Publication date: Nov 2016

Short duration bonds: Worth a look by defined contribution plans

Opportunities and risks | Appears in: Fixed income, Defined contribution plans, Insights for DC sponsors in 2017, Defined contribution (DC)

With limited interest-rate risk and a focus on high-quality, liquid investments, short duration bond funds may be suitable as a capital-preservation menu option for DC plans. Although the NAVs of these funds fluctuate, historically such fluctuations have had minimal impact on longer-term returns. Short duration funds have many advantages: They typically earn higher yields than money market funds, may be less complex for sponsors and recordkeepers to administer than stable value funds, and can be tailored to a plan’s risk and return objectives.

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