Short-duration bond funds & VNAVs
About this course
VNAVs and ultra-short bond funds in detail. The total-return view (income + capital), WAM/WAL distinctions, NAV mechanics, rating limits, when LAs use them for yield uplift over LVNAVs.
What you'll learn
- What VNAVs are
- NAV mechanics
- Total return
- Yield uplift
- Ultra-short bond funds
- Selection & TMSS
Part of these pathways
Related courses
- SONIA Forward Curve & OIS
- Money Market Funds (CNAV / LVNAV / VNAV)
- Intra-LA borrowing & lending markets
- DMADF deep dive
- Term deposits, CDs & T-Bills
- Gilts as treasury investment
Common questions
What is CD (Certificate of Deposit)?
A tradable bank deposit instrument. A bank issues a CD acknowledging a fixed-term deposit at a set rate; unlike a plain term deposit it can be sold on in the secondary market before maturity. Common holding in MMF and VNAV portfolios.
What is Fair value pricing?
VNAV NAV calculation method — every holding marked to market daily. Contrasts with amortised cost (LVNAV/CNAV inside the band). Produces the daily NAV variation that defines a VNAV.
What is LVNAV (Low Volatility NAV)?
MMF maintaining constant share price within ±20bps band. Workhorse LA cash vehicle. Same-day liquidity. WAM ≤60 days, WAL ≤120 days. Compared to VNAV: less yield, more pricing certainty.
What is Shadow NAV?
Mark-to-market NAV maintained in parallel with constant NAV in LVNAVs. If shadow drifts >20bps from constant, fund switches to variable pricing. VNAVs publish only the variable NAV — no shadow.
What is Share class?
Within a single MMF, different share classes carry different fee levels. "Premier" or "Institutional Plus" classes typically have lower TERs but require minimum subscription (£25m, £50m or £100m). LAs benefit from negotiating into the lowest-TER class their AUM qualifies for.
What is Stable cash?
Cash the council expects to hold for at least 1-3 months without operational pressure. The natural target for VNAV allocation — locking in moderate term gives the yield uplift without forcing daily liquidity needs.