Average Maturity of a debt fund portfolio is the weighted average time until all bonds in the portfolio mature — a simple measure of how long the fund has committed its money.
Average Maturity = Σ (Weight of bond i × Years to maturity of bond i). It is the straightforward, time-weighted average of when all bonds in the portfolio will return their principal. A debt fund with an Average Maturity of 8 years has committed its average rupee for 8 years. Longer average maturity = more interest rate sensitivity = more NAV volatility when rates change. It differs from Macaulay Duration, which also accounts for the timing of interim coupon payments.
Average Maturity is the simplest way to understand a debt fund's time horizon. If a fund's average maturity is 2 years, most of its bonds will mature within 2 years — it's a short-term fund. If it's 15 years, it holds long-term government bonds and will swing a lot when interest rates change. Check average maturity in the debt fund's factsheet to match the fund's time horizon with your investment horizon.
Each bond: determine its years to maturity.
Weight by each bond's percentage of portfolio.
Sum: Average Maturity = Σ (weight × years to maturity).
Liquid funds: average maturity < 91 days. Short duration: 1–3 years. Long duration/gilt: 10–20 years.
Longer average maturity → higher interest rate risk → more NAV sensitivity.