IGHG’s weighted average maturity is 14.98 years with an average yield to maturity of 1.79%. However, the effective duration is only 0.01 years – duration is a measure of a bond fund’s sensitivity to changes in interest rates, so a near zero duration reflects a negligible negative effect on the fund’s price when interest rates rise.
Consequently, the fund should outperform a long-only investment grade bond fund as rates rise. However, due to the short positions in Treasuries, the fund may underperform in periods of falling or static interest rates.
IGHG has a 0.30% expense ratio.
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Max Chen contributed to this article.