This figure is computed by weighting the maturity of each security in the portfolio by the market value of the security, then averaging these weighted figures.
We list Average Effective Maturity for Taxable Fixed-Income and Hybrid funds.
We list Average Nominal Maturity for Municipal Bond Funds.
Average effective maturity takes into consideration all mortgage prepayments, puts, calls, and adjustable coupons, and other features of individual bonds. The number listed is a weighted average of all the maturities of the bonds in the portfolio, computed by weighing each maturity date (the date the security comes due) by the market value of the security.
Average nominal maturity, unlike average effective maturity, does not take into account mortgage prepayments, puts, or adjustable coupons. It is calculated by taking the nominal maturity of each security in the portfolio by the market value of the security, then averaging these weighted figures.
Benefits
This figure can be indicative of interest rate risk. Generally speaking, the longer the maturity, the greater the interest rate risk. When duration is unavailable, this is used in the calculation of the fixed-income style box.