Weighted average maturity (WAM) is the average length of time until the securities in a portfolio mature, with each security counted in proportion to its share of the portfolio's value. It is reported by money market funds, bond funds and other holders of fixed income securities as a quick guide to how far into the future their money is lent. A short WAM means the portfolio's holdings will soon be repaid and reinvested; a long WAM means they are locked in for longer.
WAM is often shown on a fund fact sheet, sometimes simply labelled average maturity. The term is also used for pools of mortgages and other loans, where it means the average remaining term of the loans weighted by their balances. For US money market funds, WAM is a regulatory limit under SEC Rule 2a-7 of the Investment Company Act of 1940.
Weighted average maturity in plain terms
Picture a jar of IOUs. Some are due back next week, some next month and a few in four months. If you just averaged the dates, a tiny IOU would count as much as a large one. WAM fixes that by giving each IOU a say in proportion to how much money it represents, so the result tells you, roughly, when the typical pound or dollar in the jar comes home.
A fund with a WAM of 30 days gets its money back quickly and can move to higher rates soon after they rise. A fund with a WAM of five years is stuck with today's rates for much longer, for better or worse.
Formula and worked example
WAM is calculated as:
- is holding 's market value divided by the total value of the portfolio.
- is the time remaining to maturity of holding , in days or years.
- is the number of holdings.
Worked example: a money market fund holds 40% of its assets in paper maturing in 10 days, 30% in paper maturing in 30 days and 30% in paper maturing in 120 days. Its WAM is , or 49 days. A bond fund would do the same calculation in years.
WAM limits for money market funds
Under SEC Rule 2a-7, a US money market fund may not have a dollar-weighted average portfolio maturity of more than 60 days, or a dollar-weighted average life of more than 120 days. The SEC cut the WAM limit from 90 to 60 days and added the 120-day average-life limit in amendments adopted in January 2010, after the Reserve Primary Fund fell below its $1.00 share price during the 2008 financial crisis. Amendments adopted on 12 July 2023 kept both limits and specified that they be calculated using each security's share of the fund's market value, so that all funds measure them the same way; the same reforms raised minimum daily and weekly liquidity levels and introduced a mandatory liquidity fee for some institutional funds. The limits still apply as of November 2026.
The European Union's Money Market Funds Regulation sets parallel caps: a maximum WAM of 60 days and weighted average life of 120 days for short-term money market funds, and six months and 12 months for standard money market funds. Funds publish their WAM regularly, including tokenized money market funds that follow the same rules.
WAM, WAL and duration
For a floating-rate security, Rule 2a-7 lets WAM use the next interest-rate reset date rather than the final maturity, because the rate soon adjusts to the market. Weighted average life (WAL) uses the final maturity and therefore captures how long the fund is exposed to an issuer's credit risk. WAM is mainly a gauge of interest rate risk, while WAL is a gauge of credit and liquidity risk.
WAM is not the same as duration, which weights cash flows by their present value and also counts coupons paid before maturity. For short money market paper with no coupons, the two are close. For long-dated bonds, duration is usually shorter than maturity and is the better measure of price sensitivity.
Uses and limitations
Investors use WAM to compare funds and to see how a manager is positioned. When a manager expects interest rates to rise, the fund's WAM often shortens so that maturing paper can be reinvested at higher yields; when cuts are expected, WAM tends to lengthen to lock in current rates. In mortgage-backed securities, the WAM of a loan pool is paired with the weighted average coupon to estimate cash flows.
WAM has blind spots. It says nothing about credit quality, it can hide a mix of very short and very long holdings behind a moderate average, and for bonds with call features or prepayments the stated maturity may not be when money is actually repaid.