White Paper: Time to Invest in Short-Term Bonds?

This paper outlines why now may be an opportune time to invest in short-term bonds. We believe short-term bonds offer:

• Less downside risk relative to longer term bonds – since 1976 short-term bonds worst one-year performance was -0.2%, while long-term bonds worst one-year performance was -8.6%
  
  Solid long-term performance* – captured more than 75% of the return of their long-term counterparts
  
  Attractive risk/reward trade-off – the Sharpe Ratio far exceeds that of long-term bonds over all time periods
  
  Compelling investment opportunity created by current market environment – current low rates and uncertainty about future rates should shift short-term bonds to investors’ consideration set
  
  Incremental yield for investors with excess cash – for investors with excess cash reserves and greater than a one-year investment horizon, short-term bonds offer increased yield with a minimal degree of volatility

*Past performance is not indicative of future results.
Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Diversification does not guarantee a profit or protect against a loss, and cannot eliminate the risk of fluctuating prices and uncertain returns. Sharpe Ratio is a risk-adjusted measure that is calculated using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the fund’s historical risk-adjusted performance.