CHICAGO, Jun 11, 2012 (BUSINESS WIRE) -- Fort Dearborn Income Securities, Inc. FDI -0.13% (the "Fund") announced today that the Board of Directors of the Fund approved the following, effective June 12, 2012: 1) changing the Fund's permitted weighted average duration range from the current static range of 4 to 10 years to ±2 years of its benchmark index;(1) and 2) removing the reference to the average effective maturity range.
UBS Global Asset Management (Americas) Inc. ("UBS Global AM") seeks to align the Fund's target duration with its benchmark index rather than utilize a static range. The fixed income markets have undergone some significant changes in the time since the Fund first issued its shares, including the recent 2007-2008 credit crisis and the ensuing period of unprecedented accommodative central bank policy, and the very low interest rate environment. Consequently, certain properties of the Fund's benchmark index have changed, particularly its overall duration profile. Over the past several years, issuance dynamics have varied, with much of the newer corporate debt being offered with longer maturities in order to lock in the favorable low rates for longer. As a result of this extension, the Fund's benchmark duration has increased over the years and now has reached the upper limit of the Fund's permitted duration range.
UBS Global AM believes that specifying a maturity range in addition to duration is unnecessary, since duration is the ultimate measure we utilize when managing the Fund's overall interest rate exposure. Utilizing a flexible duration range will provide the portfolio management team with sufficient latitude to adjust the Fund's interest rate exposure relative to its benchmark index, but at the same time sets a specific range within which the Fund will operate.
Fort Dearborn Income Securities, Inc. is a closed-end bond fund managed by UBS Global AM. The Fund invests principally in investment grade, long-term, fixed income debt securities. The primary objective of the Fund is to provide its shareholders with:
-- A stable stream of current income consistent with external interest rate conditions, and
-- A total return over time that is above what they could receive by investing individually in the investment grade and long-term maturity sectors of the bond market.
(1) The Investment Grade Bond Index is an unmanaged index compiled by the Advisor, constructed as follows: From 12/31/81 to present--5% Barclays US Agency Index (7+ years), 75% Barclays US Credit Index (7+ years), 10% Barclays US Mortgage Backed Securities Index (all maturities) and 10% Barclays US Treasury Index (7+ years).