A bond/stock ETF that targets a constant 5-year time horizon, helping to align assets with near-term planning goals.
Overview
DDV is a Defined Duration™ ETF targeting a 5-year time horizon across its holdings using a systematic and time-weighted bond/stock asset allocation. The fund is designed for capital preservation and growth, with an emphasis on preservation over 5-year periods to align with corresponding financial-planning needs.
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Time-horizon disciplineTargets a consistent profile and rebalances to stay aligned.
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Countercyclical rebalancingMaintains a fixed time horizon by counterbalancing market trends.
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Planner-friendlyDesigned to integrate into asset–liability matching and financial planning processes.
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Use CasesModerately short asset-liability matching needs. Replacing bond aggregates, target date funds and other 3-7 year instruments.
Fund Details
| Legal Name | The Defined Duration 5 ETF |
|---|---|
| Structure | ETF |
| Total Annual Expense | 0.27% |
| Expense Waiver | (0.02%)* |
| Total Net Expense | 0.25% |
| Goal | Preservation of capital and growth |
| Rebalance | Time-weighted, algorithmic |
* The Fund’s investment adviser has contractually agreed to reduce its management fee from 0.25% to 0.23% of the Fund’s average daily net assets. This Agreement will remain in place until November 30, 2026, unless terminated sooner by the Trustees.
Portfolio Construction
DDV seeks to maintain a constant 5-year portfolio time horizon through a rules-based blend of assets using the Defined Duration method. The Fund achieves this by holding between 80–90% in high-quality investment-grade and U.S. government bonds (typically with shorter maturities), combined with a 10–20% sleeve of global equities tilted toward lower-duration characteristics, such as value and high-quality stocks.
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Allocation
- Fund of funds: Allocates across highly liquid, broadly diversified ETFs/funds for exposure to thousands of underlying instruments.
- Bonds (80–90%): Emphasis on U.S. government and investment-grade securities; maturities kept on the shorter side to anchor the overall ~5-year target.
- Equities (10–20%): Global exposure tilted toward income, value, and quality stocks to lower equity duration and reduce potential excess equity volatility.
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Time-weighted rebalancingTime-weighted rebalancing helps limit bond-sleeve duration drift and curbs excessive equity risk as markets change. When valuations or durations increase DDV systematically underweights those components and vice versa.
DDV Hypothetical Liability Match
For illustration only. Not indicative of future results or exact allocations.
DDV Hypothetical Average Allocation
Hypothetical average allocation (85% high-quality bonds, 15% global equities). For illustration only. Not indicative of current or future allocations.
Why DDV vs. Traditional Bond Funds?
Fixed Defined Duration
Traditional bond funds are issuance-weighted and allow interest rate sensitivity (duration) to drift as the market’s issuance changes. Since 1980, the U.S. bond Aggregate’s modified duration has lengthened from approximately 4.25 to 6.25 years, increasing interest-rate sensitivity while interest rates decline. This results in higher risk, lower returns, and increased sequence-of-return risk uncertainty due to duration skew. DDV maintains a target ~5-year defined duration via rules-based countercyclical rebalancing thereby offsetting interest rate risk and modified duration skew by rebalancing back to a fixed defined duration target rather than letting it float as most bond funds do.
Smart Duration Allocation
Total bond market funds buy what the market reflects and have become increasingly long-duration instruments as governments finance with longer maturities. The U.S. Aggregate’s allocation to longer-term government bonds has increased from 25% to nearly 45% as governments increasingly fund spending through long-bond issuance. This adds risk without commensurate returns. DDV eliminates low yielding, high volatility long maturity bonds, focusing on shorter maturity bonds on average and replacing some of the long bond exposure with a calibrated global equity allocation, thereby replacing inefficient long duration instruments (long bonds) with more efficient long duration instruments (high quality global stocks).
Diversified Asset-Liability Matching
Traditional asset-liability matching strategies are typically limited to bonds only. Because DDV is a multi-asset instrument it can potentially enhance ALM strategies by building a 5 year target instrument with greater diversification and similar risk/return profiles to traditional 5 year instruments. This has the potential to improve performance while maintaining a strict temporal target.
Systematic & Efficient
DDV is fully rules-based and algorithmic, supporting a tax-efficient, low-turnover and low cost portfolio.
FAQs
What does “Defined Duration” mean in practice?
Defined Duration Investing is the process of establishing financial-planning-based time horizons and then matching specific assets to those time horizons using the Defined Duration approach. We created a quantifiable process by which we can assign the defined duration, or time horizon, of certain assets and then blend and interchange them to match to specific financial planning goals.
Because equities are long-term instruments in the defined duration process we can utilize metrics like long-term CAPE ratios to quantify future expected risk adjusted returns. As you can see in the chart here, historical CAPE ratios align very closely to future long-term risk adjusted returns of stocks. By quantifying the different PE ratios of the markets we can make reasonable estimates about the time horizon over which those instruments might generate certain returns. This allows us to quantify a defined duration using estimates of sequence of returns risk. We can utilize a similar process across bonds and other instruments to estimate their expected returns, drawdown risk and defined duration. This can enhance the financial planning process by providing clarity over what is needed and when while also reducing sequence of returns risk across assets.
CAPE Ratio (Cyclically Adjusted Price-to-Earnings Ratio): A valuation metric that compares a stock index’s current price to its average inflation-adjusted earnings over the past 10 years to assess long-term market valuation.
Sharpe Ratio: A measure of risk-adjusted return that compares an investment’s excess return (over the risk-free rate) to its volatility, showing how much return is earned per unit of risk.
Is DDV a low-risk fund?
DDV is designed to generate stable real returns over a constant 5 year time horizon. This means DDV still bears market risk and could lose value, including over shorter periods. Defined Duration focuses on time alignment; it does not eliminate volatility or guarantee outcomes.
How does DDV fit within a broader plan?
DDV is ideal for matching an asset to a financial goal in the 3–7 year time horizon. This could include near-retirement planning, college funding, a home down payment, or other moderately short-term planning goals.
What is countercyclical rebalancing?
DDV uses countercyclical rebalancing to keep its ~5-year defined duration. As cycles mature and spreads tighten, issuance often extends at lower yields, raising bond risk. After sharp equity or bond rallies, DDV may over-rebalance—e.g., to 10/90 stocks/bonds—to re-anchor the target horizon and risk balance. By rebalancing in a countercyclical manner, DDV maintains a more consistent defined duration over time.
DDV uses a countercyclical rebalancing in its methodology that is similar to the way DDX operates. This operates with two different algorithms in which the interest rate risk of the bonds is controlled to be countercyclical to reduce duration skew, but also in the equity component where high valuations (and lower expected risk adjusted returns) can be throttled to maintain the target defined duration of 5 years. For instance, if global equity valuations are high and defined durations are longer than normal, the equity sleeve in DDV will tilt closer to its 10% weighting. And if equity valuations fall significantly and defined durations shorten, DDV's equity allocation will tilt closer to its 20% max weighting.
How do the stock and bond sleeves function?
DDV operates with two different algorithms. Its primary algorithm manages its interest rate risk with a constrained bond allocation of 80-90%. The fund will typically target short maturity bonds of very high quality, generally US government Treasury Bills and Treasury Notes with a maturity profile between 0-7 years. When interest rate risk is low the fund will hold more intermediate bonds and when interest rate risk is high the fund will hold more short-term bonds.
The secondary algorithm quantifies the equity exposure between a 10-20% target. This algorithm is similar to the DDX equity algorithm and rebalances in a countercyclical manner depending on valuations and market risk. Typically when valuations are high and market risk is assessed to be elevated the fund will hold an allocation closer to 10% and vice versa. The equity sleeve in DDV is constrained to high quality and low volatility equities with a shorter average defined duration to reduce potentially excessive equity volatility contributions.
How much does DDV cost? Is it tax efficient?
DDV has a net expense ratio of just 0.25% and gross expense ratio of 0.27% (fee waiver of 0.02%). Its fund-of-funds structure allows it to be highly tax-efficient, as the fund can rebalance internally without triggering capital gains, which would be necessary if we held the same allocation in its individual components.
However, investors may still realize taxable distributions, and individual tax outcomes depend on personal circumstances. DDX’s tax efficiency is not guaranteed and may vary depending on market conditions and fund activity.
IMPORTANT INFORMATION
The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. Click here for the Fund's Prospectus, and here for the Fund's SAI. All fund documents can be found at https://disciplinefunds.com/documents/. A free hardcopy of any prospectus may be obtained by calling +1.215.882.9983. Read carefully before investing.
There is no assurance that the Funds will achieve their investment objectives. The Funds may underperform their benchmarks or fail to meet defined duration targets or positive returns.
New Fund Risk. The Funds are recently organized management investment companies with limited operating history. There can be no assurance that the Funds will grow to or maintain an economically viable size.
Equity Investing Risk. An investment in the Funds involve risks similar to those of investing in any fund holding equity securities, such as market fluctuations, changes in interest rates and perceived trends in stock prices. The values of equity securities could decline generally or could underperform other investments. In addition, securities may decline in value due to factors affecting a specific issuer, market or securities markets generally.
Foreign Investment Risk. Returns on investments in underlying ETFs that invest foreign securities could be more volatile than, or trail the returns on, ETFs that invest in U.S. securities. Investments in foreign securities involve political, economic, and currency risks, greater volatility and differences in accounting methods. These risks are magnified in emerging markets.
Frontier Markets Risk. Compared to foreign developed and emerging markets, investing in frontier markets may involve heightened volatility.
Emerging Markets Risk. DDX and DDXX may invest indirectly in companies organized in developing and emerging market nations. Investments in securities and instruments traded in developing or emerging markets, or that provide exposure to such securities or markets, can involve additional risks relating to political, economic, or regulatory conditions not associated with investments in U.S. securities and instruments or investments in more developed international markets. Such conditions may impact the ability of the Funds to buy, sell or otherwise transfer securities, adversely affect the trading market and price for Funds shares and cause the Funds to decline in value.
Bond and Fixed Income Risks. DDV and DDX will be subject to bond and fixed income risks when it invests in bond ETFs. Changes in interest rates generally will cause the value of fixed-income and bond instruments held by underlying bond ETFs to vary inversely to such changes.
Countercyclical Investing Style Risk. DDV and DDX are subject to the risk of periods of underperformance versus comparable passively-managed funds due to counter-cyclical investing. If the equity markets are rising and the economy is robust, the counter-cyclical style may cause the Funds to hold less equity securities, which may cause it to underperform for a period. In the event of a large equity market or macroeconomic decline (that is, the U.S. economy is performing poorly), the countercyclical rebalancing methodology may result in a higher equity allocation.
Quantitative Security Selection Risk. Data for some ETFs and for some of the companies in which the underlying ETFs invest may be less available and/or less current than data for companies in other markets due to various causes. The ETFs selected using a quantitative model could perform differently from the financial markets as a whole, as a result of the characteristics used in the analysis, the weight placed on each Characteristic, and changes in the characteristic's historical trends.
Fund of Funds Risk. Because the Funds invest primarily in other funds, the Funds' investment performance largely depends on the investment performance of the selected underlying exchange-traded funds (ETFs). An investment in the Funds is subject to the risks associated with the ETFs that then-currently comprise the Funds' portfolio.
Management Risk. The Funds are actively managed and may not meet their investment objective based on the Adviser's or Sub-Adviser's success or failure to implement investment strategies for the Funds.
Growth Investing Risk. DDXX invests in growth securities, which may be more volatile than other types of investments, may perform differently than the market as a whole and may underperform when compared to securities with different investment parameters. Under certain market conditions, growth securities have performed better during the later stages of economic recovery (although there is no guarantee that they will continue to do so). Therefore, growth securities may go in and out of favor over time.
Long Duration Investing Risk. DDXX seeks to invest in equity ETFs with a Defined Duration target of 20 years. Stocks with longer durations are more sensitive to changes in interest rates, which means that as interest rates rise, the present value of future cash flows decreases more significantly. This makes stocks with long durations riskier in a rising interest rate environment.
U.S. Government Securities Risk. DDV and DDX will invest in U.S. Treasury securities indirectly through U.S. Treasury bond ETFs. U.S. government securities are subject to market risk, interest rate risk and credit risk.
An investment in the Funds involves risk, including possible loss of principal. Exchange-traded funds (ETFs) trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF's net asset value (NAV), and are not individually redeemable directly with the ETF. Brokerage commissions and ETF expenses will reduce returns. ETFs are subject to specific risks, depending on the nature of the underlying strategy of the Fund, which should be considered carefully when making investment decisions. For a complete description of the Funds' principal investment risks, please refer to the prospectus.
Rebalancing and tax-efficient management strategies may not prevent losses in declining markets. Tax outcomes are not guaranteed, and investors may still receive taxable distributions. Results will vary depending on individual circumstances and market conditions. Investors should consult their own tax advisors regarding the tax consequences of an investment in the Funds.
Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market. Past performance does not guarantee future results.
Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly.
Shares of the Funds are not FDIC Insured, may lose value, and have no bank guarantee.
This information provided here is for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.
Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. References to other funds should not be interpreted as an offer of these securities.
The Funds are distributed by PINE Distributors LLC. The Funds' investment adviser is Empowered Funds, LLC, which is doing business as ETF Architect. Orcam Financial Group, LLC (DBA Discipline Funds) serve as the Sub-advisers to the Funds. PINE Distributors LLC is not affiliated with ETF Architect or Orcam Financial Group, LLC (DBA Discipline Funds).Learn more about PINE Distributors LLC at FINRA's BrokerCheck.
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