ACT & HSBC Asset Management wrote recently on "Ultra Short Duration Bond Funds: Seeking the right balance between risk and return," and on "Ultra Short Duration Bond Funds: The importance of credit." The first article talks about the topic of ultra-​short bond funds and how they can supplement MMFs. It starts off, "In the pursuit of an improvement in yield for longer-​term cash holdings, beyond that provided by money market funds (​MMFs), treasurers have access to various fixed-​income investment options. The key is finding a suitable risk-​adjusted strategy, where an increase in the yield for cash that can be locked away for longer is delivered without significantly increasing risk. Compared to other longer-​term investment strategies, the case for Ultra Short Duration Bond Funds (​USBFs) is compelling, demonstrating better risk-​return characteristics than many other fixed-​income strategies." The second piece continues with the topic of ultra-​short bond funds and the risk behind them. This piece states, "An Ultra Short Duration Bond Fund (​USBF) can present a viable solution for treasurers seeking to improve yield, reduce volatility of returns (​versus Short Duration strategies) and diversify exposure away from banks and sovereigns, typically used in a money market fund (​MMF). With the appropriate credit strategy, the right USBF can achieve these objectives, without significantly increasing risk. Following on in the USBF series, this second article will focus on the importance of credit in an USBF and the reasons why investors should carefully consider the credit risks, which need to be specifically managed to meet the objectives."

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