Put simply duration is about time - the weighted average time until the cash flows from a bond (or a cash or bond fund) are received.

## Using duration to measure risk

It is also widely used as a measure of risk โ as the longer the time until those cash flows are received the greater the exposure to risk from the movement of interest rates.

Duration is traditionally measured in years so 0.25 is 3 months and 3.58 is 3 years and 7 months.

As the Kernel Cash Plus Fund is primarily a short-term investment, we chose to publish the duration in months to make it easier to understand. Broadly, a fund with a duration of 6 months may be somewhat comparable in terms of interest rate risk to a term deposit of 6 months.

## Calculating duration

The calculation of the duration of a diversified portfolio is a relatively complicated topic and there are various types of duration measurement.

Here we have taken a very simplified approach to explain the primary reason an investor might consider the duration of an investment fund, which is an approximate measure of interest rate risk. Further reading can be found here.