Dimensional steps into ETF waters
Austin, Texas-based Dimensional Fund Advisors, a systematic active money manager with close to four decades of experience and USD514 billion under management, is stepping into the ETF pool, with the planned launch of three ETFs later this year.
Marlena Lee, Head of Investment Solutions, Dimensional Fund Advisors says: “It’s always about helping our clients and many of our clients have asked us to launch ETFs. From our perspective, if we feel we can bring the full value add of the Dimensional approach to the structure, then we do like to offer our solutions in different vehicles so the clients have choice.”
The new ETFs will offer broadly diversified, all cap core equity exposure to US, non-US developed, and emerging markets.
Lee says: “These will be actively managed transparent ETFs.” The firm did not consider the new semi-transparent ETF model, believing that the high diversification of the firm’s systematic approach will mean that they don’t need to hide parts of their portfolios.
“ETFs are not new for us as we have sub-advised ETFs for almost five years,” Lee says. “We have been watching this space and, with the implementation of the ETF rule, we believe we can now bring the full Dimensional approach to the ETF structure.”
The ETF rule has done away with the exemptive orders on creation and redemption baskets allowing Dimensional to use the approach they have been applying in their mutual funds to ETFs. “We rebalance our portfolios every day, so we are not using an index approach,” Lee says. “We have a flexible approach to trading and higher expectations of returns. We try to combine the best of index and active management so our solution tends to be low cost and well diversified but with the advantages of systematic active.”
It is more than likely that Dimensional will be adding to the three ETFs that they have announced, once they have evaluated and discussed with their clients on their feedback.
“Our new ETFs will be managed with the same research and our systematic approach as with other mutual funds which have a long history of delivering value over the benchmark to our clients,” Lee says.
“We expect to have a similar methodology to pricing as we do to all of our offerings, monitoring the landscape to show how solutions are being priced.
“We are really excited to come to market with these ETFs which will help our clients have a better investment experience.”