A systematic approach that aligns portfolio and personal value

This isn’t Dimensional Fund Advisors’ first Fund Manager of the Year Awards rodeo, but it is the first where they have taken out both the top spot and highly commended in the Global Fixed Income category, along with the coveted 2024 Fund Manager of the Year gong.

The Dimensional Two-Year Sustainability Fixed Interest Trust (AUD) managed to edge its sister fund, the Dimensional Five-Year Diversified Fixed Interest Trust, and nab the win, with Senior Portfolio Manager, Rob Ness, crediting the firm’s “disciplined and systematic process” as the key to its success.

“Dimensional’s fixed interest portfolios are based on well researched, empirically and theoretically robust drivers of expected returns in the fixed income markets: term and credit quality,” Ness said.

“Dimensional runs broadly diversified, low-cost strategies that systematically change the portfolio’s exposure to term premiums and credit premiums in response to changes in security prices.

“The strategy also uses a market price-based credit monitoring process, which combined with global diversification leads to superior risk management.

“The traditional fundamental active approach relies on unreliable forecasts of various economic conditions such as interest rate changes, corporate earnings and geopolitical events.

“We have seen plenty of examples, from recent interest rate movements to Russian invasion of Ukraine, that this is an ineffective approach. On the other hand, the traditional passive indexing approach generally ignores information embedded in current market prices about a bond’s expected return.”

Dimensional blends its expertise in applying “rigorous academic research to practical investing” with its 30-year-long history in Australia alone, with the Two-Year Sustainability Fixed Interest Trust (AUD) one of several products to “stand the tests of time” as a result.

Ness says it is with the backing of this “disciplined investment approach” that the fund has delivered for investors.

“[It] has resulted in strong performance over the recent period due to its relatively short duration positioning and its emphasis on credit leading up to the recent rally in credit markets,” he said.

“This investment solution is generally suited for any fixed income investor looking for lower interest rate sensitivity relative to the broad global bond market whilst taking advantage of opportunities in global credit markets.”

While the fund already offers investors the opportunity to pocket consistent and stable income amid market volatility, it also possesses the added benefit of appealing to investors’ personal, sustainability-aligned investment goals.

“The Dimensional Two-Year Sustainability Fixed Interest Trust (AUD) provides investors the opportunity to access our systematic investment approach and align their portfolio with their personal values,” Ness said.

“The Sustainability metrics are broadly focused on lowering exposure to Carbon Emissions and some social categories such as Controversial Weapons, Alcohol, Tobacco, and more.”