Fund Rationale: Dimensional Global Short Fixed Income Fund

Dimensional Global Short Fixed Income Fund
SGD Institutional Class Accumulation Shares (ISIN:IE00BF20L549)
Fund Manager Page

Introductory information
The Dimensional Global Short Fixed Income Fund (the "Fund”) seeks to maximise current income while preserving capital. Dimensional deploys a systematic strategy with a view to capture expected credit premiums and expected term premiums. Expected credit premium is the difference in expected return between bonds of similar maturity but different credit quality, and expected term premium is the difference in expected return between long-term and short-term bonds.  

The Fund is suitable for investors who have a long-term investment horizon, seeking to maximise current income while preserving capital. The Fund is benchmarked against the FTSE World Government Bond Index 1-5 Years (hedged to SGD). The Fund is an Irish-domiciled UCITS fund, and its inception date of the SGD share class was 25 July 2017. Its oldest Euro share class was incepted on 25 Jan 2007. It has assets under management of SGD 3.9bn across all share classes as of June 2020.

Characteristics
The Fund has exposure to high quality, fixed or floating rate investment grade short term instruments including bonds and other instruments issued by governmental, quasi-governmental and corporate issuers predominately in developed countries, such as commercial paper, bank obligations and corporate debt obligations The Fund will primarily invest in instruments that will mature in five years or less, and maintain an average portfolio duration of five years or less. As of June 2020, the Fund has 257 holdings in a diversified portfolio with an average yield to maturity of 0.51%. The average maturity is 1.52 years and the average duration is 1.51 years. The average credit rating is AA and the Fund’s largest allocation geographically is 16.98% in Canada, followed by 14.93% in France, 14.84% in Supranational, 12.74% in Germany, and 8.55% in Netherlands.

Background information and cost
The Fund has an underlying fund management fee of 23bps per annum (0.23% p.a.) and a total expense ratio of 27bps per annum (0.27% p.a.) as of 30 June 2020. As the fund scales, Dimensional and Endowus will continue to reduce the fees paid by the client for the underlying fund. Endowus do not charge an upfront sales charge or any other fees, other than the all-in Access Fee. 

Dimensional Fund Advisors are a global investment firm guided by deep convictions about the power of capital markets. They are a leader in applying advanced financial science to equity and fixed income investment strategies. By employing a rigorous and systematic investment approach, Dimensional seek to capture what the market offers in all its dimensions. For more than 30 years, Dimensional have translated research into real-world investment solutions for clients. Their clients include financial advisors, pension funds, retirement plans, college savings plans, insurance companies, endowments and foundations, and sovereign wealth funds. Dimensional manage USD USD 514bn firm-wide as of June 30, 2020.

Selection criteria for Endowus
Endowus have selected the Dimensional Global Short Fixed Income Fund for its systematic risk exposures in a broadly diversified global portfolio of high credit quality short-term debt, and its proven ability to generate enhanced performance relative to the benchmark with a slightly higher volatility. The fund’s oldest share class outperformed the benchmark by 0.35% (in Euro terms) on an annualised basis since inception, and its worst drawdown was -3.92% compared to -3.68% (in Euro terms) of the benchmark, as of Aug 2020.

Research by academics has shown that there are systemic factors in fixed income that are pervasive and proven factors that add statistically significant positive returns above the market at an efficient cost. These are term and credit premiums. Dimensional use information in spreads to gain additional smart excess returns that are systematically harvested over the long-term in a disciplined and well-researched investment process. The global diversification adds to the opportunity set to harvest these returns. This is implemented through an integrated fixed income portfolio management and trading that pursues higher expected returns with cost-effective execution. We are using Dimensional’s institutional clean share class with no loaded fees. It is an Irish domiciled UCITS fund which is more tax efficient and it is denominated in Singapore dollars to make it an FX efficient portfolio for Singapore based investors matching your assets with your future liabilities and thereby removing unnecessary FX risk and cost.

Updated by Endowus: 24 Sept 2020 

** Disclaimer
Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Any opinions expressed reflect a judgment at the original date of publication by us and are subject to change without notice.

The prospectus, profile statement, product highlight sheet, fund factsheet or other offer or product documents may contain references about the expected risk tolerance of their target investors. These are in no way indicative of how we at Endowus have assessed your risk tolerance based on your stated objectives and financial situation. Endowus accepts no responsibility for investment decisions made in response to the expected risk tolerance levels mentioned in the product or offer documents.