Investment service provider Dimensional Fund Advisors Ltd. has launched a fund designed to offer investors protection against unexpected UK inflation while aiming to maintain lower price volatility and achieve higher expected returns through exposure to the credit premium.
According to the provider, investors in index-linked gilts face constraints with mainly longer-duration securities, exposing them to interest rate sensitivity and price volatility. By solely investing in government securities, they miss out on fixed income’s potential credit premium component.
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The offering, Dimensional Launches Sterling Short Duration Real Return Fund, invests in short-duration UK gilts (both conventional and index-linked) to mitigate price volatility and enhance returns. It also includes short-duration investment-grade corporate bonds from the UK and other regions, adjusting credit exposure using the provider’s proven method.
Additionally, the fund incorporates an inflation hedge through inflation swaps with hedged non-sterling currency exposure to GBP.
