Why Short Maturity Bond Funds Can Be a Smart Move for Cautious Investors

When it comes to investing, understanding your financial goals, risk appetite, and time horizon is key. For many investors, the idea of high-risk, high-reward investments can feel overwhelming. If you’re someone with a low-risk tolerance or simply want a more stable approach, short maturity bond funds might be the solution you’ve been looking for. As you may have noted, we recently added three new funds to our Cash Plus offering to provide you with more flexibility when it comes to your investment planning. Let’s see together what to expect from short maturity bond funds and why they can be a smart addition to your portfolio.

What Are Short Maturity Bond Funds?

Short maturity bond funds are a type of debt fund designed for investors with a short-term investment horizon, typically between 3 to 12 months. These funds invest in bonds and debt instruments with shorter durations, aiming to offer potential returns that are slightly higher than a traditional savings account but with less risk than equity funds.

Thanks to their low correlation with the stock market, short maturity bond funds can act as a valuable diversifier in a portfolio. Their volatility is much lower compared to the stock market, and the potential for significant losses is limited. Whether you’re waiting for the right moment to make a bigger investment or just want to avoid the volatility of riskier assets, short maturity bond funds provide a potentially interesting option.

Why Invest in Short Maturity Bond Funds?

1. Lower volatility than the stock market

If you’re a risk-averse investor, short maturity bond funds are designed to provide more stable returns. Since these funds invest in short-term debt instruments, they are less affected by interest rate fluctuations. This makes them an excellent choice if you want to avoid the wild swings often seen in stock markets or longer-duration bond funds.

2. A Haven for Your Money

Not ready to dive into thematic equity funds yet? You can “park” your money in a short maturity bond fund while you make investment decisions. Instead of leaving your capital idle in a bank account, where inflation might erode its value, this type of fund allows your money to earn a modest return while you plan your next move.

3. A Gradual Approach to Thematic Equity Investing

If you’re interested in thematic equity funds but prefer not to invest a large sum all at once, short maturity bond funds offer a great solution. You can gradually move your money from these bond funds to your desired equity investments on a monthly basis. This strategy allows you to partially reduce risk and avoid timing the market.

Key Benefits of Short Maturity Bond Funds

1. Liquidity

Short maturity bond funds are highly liquid, meaning you can access your money relatively quickly if needed. This flexibility is crucial if you foresee needing cash on hand within the next 3 to 12 months.

2. Mitigate Inflationary Erosion

One of the significant advantages of these funds is their ability to help reduce inflation’s impact on your capital. While the returns may not be spectacular, they can at least keep your money working for you, instead of losing value in a low-yield savings account.

3. Relatively Stable Returns

While they don’t offer the high returns of more aggressive funds, short maturity bond funds potentially provide consistent, stable returns, making them a reliable choice for cautious investors.

Our Cash Plus offerings

AZ Fund 1 – AZ Bond – Enhanced Yield*

This fund seeks to generate yield income and capital appreciation by primarily investing in floating and fixed-rate debt securities issued by governments. It focuses on securities with short maturities around 24 months.

AZ Fund 1 – AZ Bond – Income Dynamic*

Designed to provide yield income and capital appreciation, this fund invests in a mix of floating and fixed-rate debt securities from both government and corporate issuers, with a focus on short-term maturities.

AZ Fund 1 – AZ Alternative – Capital Enhanced*

This fund aims for steady capital appreciation by deploying option strategies on the S&P 500, adjusted according to market conditions. The fund also invests its cash component in bank deposits and short-term investment-grade bonds. The AZ Fund 1 – AZ Alternative – Capital Enhanced fund, while having a low volatility, potentially has an expected return slightly higher than the other two available funds.

Final Thoughts

Short maturity bond funds offer a compelling option for investors who value stability and need flexibility in their financial plans. Whether you’re parking your money temporarily or building a buffer against inflation, these funds provide a balance between safety and modest returns. For those with a cautious approach to investing, they can be a smart addition to your portfolio—especially when used alongside thematic equity funds for more diversified, long-term growth.

By aligning your investments with your goals, risk tolerance, and timeline, short maturity bond funds can become a valuable part of your financial strategy.

*Sub-fund of the AZ Fund 1 (the “Fund”) qualified as a Luxembourg multi-compartment mutual fund established by Azimut Investment SA and distributed by Azimut Capital Management SGR S.p.A. Source: prospectus.

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