Fixed Income Portfolio Management

1 CE Credit | 53-Minute Video

This session offers perspectives on how Dimensional builds and manages fixed income portfolios to meet specific investor goals. It introduces term and credit as fixed income dimensions and explains how Dimensional uses market pricing, as demonstrated through changes in the yield curve and credit spreads, to pursue higher expected returns in broadly diversified strategies. The session includes discussions on applying Dimensional’s variable-maturity and variable-credit approaches, gaining access to global yield curves while hedging currency risk, and using the implied credit rating in market prices. The speaker explains the firm’s approach to value-added trading, and maps fixed income strategies by term and credit dimensions.

Learning Objectives

1. Understand why market prices/yields contain information and how to use this information to construct fixed income portfolios, monitor issuer creditworthiness, and trade effectively and efficiently.

2. Consider how wide term and credit spreads are associated with higher expected term and credit premiums.

3. Explore details of Dimensional’s variable-maturity approach, which pursues higher term premiums by shifting average portfolio maturity/duration toward the most favorable expected return segment of the yield curve.

4. Learn more about Dimensional’s variable credit approach, which emphasizes lower credit quality investment-grade bonds when credit spreads are wide and higher credit quality investment-grade bonds when credit spreads are narrow.

5. Understand why a strategy that considers global yield curves for potential diversification and enhanced returns can be better than a domestic-only strategy.

6. Learn how to use market data (TRACE) to access and monitor issuer credit risk. Understand why patient trading can enable flexibility (time and substitutes) and help reduce transaction costs.

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