extension applied to a global portfolio.19 Our bond beta extension of 0.18 means that for every 10 percent increase in the J.P. Morgan Global Government Bond Index, our global bond portfolio is expected to outperform by 1.80 percent. One might ask whether holding a beta extension in both stocks and bonds represents leverage. The answer depends on which definition of leverage is used, and unfortunately, there are several. To appreciate this difficulty, consider a recent report from the Leverage & Derivatives Subcommittee of the Association for Investment Management and Research (AIMR) Investment Performance Council: The discussion of [leverage] has been rather involved due to the fact that the use of leverage can be viewed from many different angles (e.g., trading portfolios, money manager, etc.). As a consequence, the Subcommittee has abandoned former approaches to give a rather specific definition of the term "Leverage." Instead, it will propose a rather general definition of the term. . . .20 The committee recently arrived at a much oversimplified notion of leverage that any portfolio employing securities or strategies that might cause leverage must be leveraged: In general, a portfolio is considered to be leveraged if certain instruments or strategies such as financing assets through liabilities (e.g., margin) or the use of futures, options, or other derivative instruments are employed. These strategies are implemented in order to alter the return impact ("exposure") that a unit move in certain underlying securities markets will have on the portfolio to an extent otherwise unachievable without the use of those instruments or strategies. Rather than being occasionally used (e.g., for insuring the value of the portfolio in case of a market crash), the potential use of these strategies is assumed to be an integral part of the investment strategy.21 By this new AIMR definition, accounts using futures to reduce the beta of an investment account to bring it closer to the benchmark would be leveraged. In fact, by the AIMR definition, traditional bond managers cannot use derivatives of any kind to manage the duration of their portfolios without falling under the definition of leverage. "Duration measures the price impact in a bond for a given interest rate change. In a bond index, duration is calculated assuming a parallel shift across all maturities in the index. Conceptually, one could define a global duration that would similarly assume a parallel shift that is equal across all maturities and all countries. However, such a concept would not accurately reflect the impact of shifts in global interest rates, as correlations across countries are substantially less than one, and interest rate volatilities can be quite different around the world. 20Update Report of the Leverage 8c Derivatives Subcommittee of the Investment Performance Council, March 1, 2002, AIMR. 21Update Report of the Leverage 8c Derivatives Subcommittee of the Investment Performance Council, June 1, 2002, AIMR.