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Bond Trading at Dimensional: Seeking an Edge for Better Execution

Investing Insights

Bond Trading at Dimensional: Seeking an Edge for Better Execution

Dimensional uses a flexible trading approach that aims to achieve better execution—and the results are a testament to the value we deliver for clients.

Trade cost analysis from 2019 and 2020 shows that, on average, Dimensional bought corporate bonds at lower prices and sold them at higher prices than other market participants trading in the same bonds just before and after our trades.

Unlike strategies that may require trading in particular securities at a specific time or price, Dimensional’s systematic approach allows us to home in on bonds with similar characteristics but that offer more desirable execution prices.

The benefits of that approach—transacting at more advantageous prices—are reflected in the returns investors get. This is just one of many positive outcomes from our dynamic investment process.

For 40 years, Dimensional has employed a systematic and cost-effective approach to seek every bit of return we can for our clients.

Includes TRACE-eligible (Trade Reporting and Compliance Engine) corporate bonds traded by Dimensional. Adjacent trades by other market participants had the same direction as our trades (buys with buys, sells with sells) and were the most recent trade before and after our trades. TRACE is a Financial Industry Regulatory Authority, Inc. (FINRA)-developed vehicle that facilitates mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities. Data compiled by Dimensional. TRACE-eligible corporate bond trades from January 1, 2019, to December 31, 2019, and from January 1, 2020, to December 31, 2020. Comparative trades (prior and post) are not filtered on trade size. This could have a considerable effect on the relative trade prices.
One basis point (bps) = One hundredth of a percentage point (0.01%).
Past performance is no guarantee of future results. Investing risks include loss of principal and fluctuating value. There is no guarantee an investment strategy will be successful. The performance returns calculated for the Dimensional strategies already reflect trading costs.
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission