Investment-grade bonds with maturities of less than three and a half years seek to deliver attractive returns with low volatility. But these “limited-term” bonds can also act as a stabilizing force in fixed-income portfolios by lessening the impact of rising interest rates.

Holding a portfolio of medium and long-term bonds made sense when interest rates were falling. But rates have been near their historical lows for a while now-and may have nowhere to go but up. Even a small rise in interest rates could have a big impact on bond portfolios. Investors can help reduce the duration of their portfolios and seek to smooth out returns with a higher allocation to limited-term bonds. The average limited-term bond has an average duration that is significantly less than Treasuries.1

Limited-term bonds have proven to be one of the least volatile assets over the past 20 years, with lower peak-to-trough declines than other bond sectors. Their returns are also much less volatile than intermediate-term bonds, senior loans, and high yield debt.1

To limit its exposure to rising interest rates, Oppenheimer Limited Term Bond Fund typically invests in investment-grade sectors with an average portfolio duration of between 1 and 3.5 years. The Fund typically consists of a mix of corporate, Treasury, agency and mortgage securities and is designed to generate stable performance across many market environments.

1Source: Factset, Credit Suisse, Bloomberg and Bloomberg Barclays, as of 3/31/16. Asset class representations and index definitions can be found below. Past performance does not guarantee future results.