The Credit Edge by Bloomberg Intelligence Dimensional Says High-Yield Public Debt Has the Edge Over Private
May 29, 2025
In this enlightening discussion, Savina Rizova, Co-chief Investment Officer at Dimensional Fund Advisors, shares her insights on the current state of credit markets. She argues that private credit often fails to outperform public junk debt, highlighting the importance of liquidity and transparency in public markets. Rizova also touches on Dimensional's move into mortgage-backed securities and the strategic benefits of their active ETF management. Overall, it’s a compelling look at navigating credit investments amidst market uncertainties.
AI Snips
Chapters
Transcript
Episode notes
Using Forward Rates to Predict Returns
- Dimensional uses forward rates, combining yield and roll down, to gauge expected bond returns daily across credit, duration, and currency spectrums.
- This scientific, data-driven method guides their systematic bond allocation and investment decisions.
Leverage Real-Time Market Data
- Use real-time market data like Trace, CDS prices, and equity prices to monitor expected returns and credit quality daily.
- Incorporate dealer inventory and trading quotes to improve execution and control portfolio risks and costs.
Combining Top-Down and Bottom-Up
- Dimensional blends top-down and bottom-up investing daily, analyzing spreads first then selecting bonds by expected returns and liquidity.
- Flexibility in bond selection and execution leads to better trade prices and overall portfolio management.