Investment Strategy
The Portfolio invests 100% of its assets in the DFA Two-Year Global Fixed Income Portfolio (the "Two-Year Global Portfolio"), which seeks to maximize total returns from a universe of U.S. and foreign debt securities maturing in three years or less from the date of settlement. The Two-Year Global Portfolio invests in obligations issued or guaranteed by the U.S. and foreign governments, their agencies and instrumentalities, corporate debt obligations, bank obligations, commercial paper, repurchase agreements, obligations of other domestic and foreign issuers, securities of domestic or foreign issuers denominated in U.S. dollars but not trading in the United States, and obligations of supranational organizations. At the present time, Dimensional Fund Advisors LP (the "Advisor") expects that most investments will be made in the obligations of issuers which are in developed countries. However, in the future, the Advisor may consider investing in issuers located in other countries as well. The fixed income securities in which the Two-Year Global Portfolio invests are considered investment grade at the time of purchase. Under normal market conditions, the Two-Year Global Portfolio intends to invest its assets to gain exposure to issuers of at least three different countries, one of which may be the United States. An issuer may be considered to be of a country if it is organized under the laws of, maintains its principal place of business in, has at least 50% of its assets or derives at least 50% of its operating income in, or is a government, government agency, instrumentality or central bank of, that country. As a non-fundamental policy, under normal circumstances, the Two-Year Global Portfolio will invest at least 80% of its net assets in fixed income securities that mature within two years from the date of settlement.
It is the policy of the Two-Year Global Portfolio that the weighted average length of maturity of investments will not exceed two years. In making purchase decisions, if the expected term premium is greater for longer-term securities in the eligible maturity range, the Advisor will focus investment in the longer-term area, otherwise, the Two-Year Global Portfolio will focus investment in the shorter-term area of the eligible maturity range. In addition, the Two-Year Global Portfolio is authorized to invest more than 25% of its total assets in U.S. Treasury bonds, bills and notes, and obligations of federal agencies and instrumentalities.
Because many of the Two-Year Global Portfolio's investments may be denominated in foreign currencies, the Two-Year Global Portfolio may also enter into foreign currency forward contracts to attempt to protect against uncertainty in the level of future foreign currency rates, to hedge against fluctuations in currency exchange rates or to transfer balances from one currency to another. In regard to currency hedging, it is generally not possible to precisely match the foreign currency exposure of such foreign currency forward contracts to the value of the securities involved due to fluctuations in the market values of such securities and cash flows into and out of the Two-Year Global Portfolio between the date a foreign currency forward contract is entered into and the date it expires. The Two-Year Global Portfolio may purchase or sell futures contracts and options on futures contracts, to hedge its currency exposure or to increase or decrease market exposure based on actual or expected cash inflows to or outflows from the Two-Year Global Portfolio.
The Two-Year Global Portfolio may lend its portfolio securities to generate additional income.
Investment Risks
The Portfolio is subject to market risk, foreign securities and currencies risk, foreign government debt risk, interest rate risk, credit risk, income risk, derivatives risk, liquidity risk, securities lending risk, operational risk, and cyber security risk. See "DFA Portfolios Principal Risks" on pages 12 and 13 of the February 2016 MOST 529 Newsletter for a description of these risks.
