The Benefits of Dimensional’s Systematic Fixed Income Approach

This has come up a lot with clients, is this growth of systematic fixed income, and why should we pay attention now more than in the past? And there's two big reasons in my mind: The first one is, when you look at where interest rates are, they're quite low. Over this time period that we're looking at, interest rates have been low. How do you increase expected return in a prudent fashion, a risk-managed fashion, in a low interest rate environment? Well, look at this. Look what it's done over the past three years. The other piece then is, do what you say you will do, in a crisis. I think there's a lot of soul searching after a crisis. People look at a fixed income strategies, and didn't get what they expected to get outta their fixed income strategies in 2020. I'll give you an example. Some indexes chose not to rebalance in March, 2020, because of liquidity issues in the marketplace. March, 2020 was a very important time to increase your allocation to lower-credit quality bonds, if you're pursuing credit premiums. That's what this strategy was able to do. If you weren't able to do that, you missed a big opportunity. So after a crisis, you often get this kind of soul searching. And I have some numbers. If you go back about 10 years after the financial crisis, there was about 180 billion, in what Morningstar called strategic beta. Those are strategies that are not market weighted. Morningstar's definition is index. So you can call 'em systematic strategies. Now there's about 1.7 trillion. As of a recent date, there's about 20 billion in strategic beta fixed income. And I think is, this is a real watch to this space, for anyone who's a financial professional, learn about systematic fixed income now, learn of the benefits for you and your clients. Cause I think this is very much a space that we expect to grow. And we've been doing it for four decades, but we expect it to grow quite significantly, over the next decade or so.