Fund Spotlight: The Defined Duration 5 ETF (ticker: DDV)

The Defined Duration suite is a three-fund structure that allows investors to build a seamlessly time aligned asset allocation. The Defined Duration 5 ETF (DDV) is best applied to the 3–7 year time horizon, addressing moderately short-term planning needs such as near-retirement spending, college funding, or major life purchases.

The fund seeks to balance capital preservation and moderate growth, focusing on generating stable real returns over an average five-year defined duration.

How It Works

DDV maintains a strategic allocation of 80–90% high-quality bonds and 10–20% global equities.

The bond sleeve typically holds shorter-duration, high-quality fixed income such as U.S. Treasury Bills and Notes. It is designed to mimic the behavior of a diversified bond fund while eliminating exposure to long-duration government bonds. The equity allocation consists of high-quality, shorter-duration equities, such as value stocks and low-volatility global equities, replacing inefficient long-duration bonds with more effective long-duration growth instruments. The fund employs a countercyclical rebalancing process to manage both bond duration drift and equity market risk, maintaining consistent exposure to its five-year target horizon.

Why DDV Over Other Short-Term Options?

Over the last five decades, the aggregate bond market’s modified duration has increased from roughly 4.25 to 6.25 years (source: Bloomberg), while interest rates have declined. This means investors are taking on more interest-rate risk while earning lower returns.

This phenomenon reflects a structural bias: bond markets are not fully free markets, rather they are heavily influenced by government issuance. As government debt has expanded, so too has the proportion of long-term Treasury issuance in the market. U.S. government debt has risen from 25% of the aggregate bond market in the 1970s to over 45% today (Source: FRED, Bloomberg and Marquette Associates), effectively forcing bond indexes to hold longer and lower-yielding instruments. We believe long-duration government bonds are inefficient long-term instruments—offering low expected returns and high volatility. By removing these bonds and replacing them with carefully selected equity styles, DDV substitutes a poor long-duration asset with a more efficient long-duration instrument. This helps maintain the desired duration exposure while improving potential return efficiency relative to risk.

Use Cases for DDV

DDV is ideal for use within an asset–liability matching (ALM) or financial planning framework, particularly for moderately short-term goals.

Typical use cases include:

• Bridging portfolios for near-retirement spending.
• School tuition or large near-term expenditures.
• Intermediate-term liability matching within defined duration frameworks.
• Replacement for intermediate bond ETFs or funds with 3–7 year durations.
• Alternative to target-date funds for investors seeking customizable time horizons with planner oversight.

To learn more about DDV please see here.

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