Dimensional Fund Advisors to add six new funds to ETF offering
Dimensional Fund Advisors, a specialist in systematic factor investing, has filed a preliminary registration statement with the Securities and Exchange Commission to launch six new actively managed, tax-efficient exchange-traded funds (ETFs).
Additionally, the company has announced plans to convert six tax-managed mutual funds into those new ETFs in 2021. The new ETFs will extend Dimensional’s existing suite of ETFs, the first two of which are expected to be listed on NYSE Arca beginning 18 November. These developments are another step in offering greater choice in how financial advisors and institutional investors can access Dimensional’s investment solutions.
Dimensional will be one of the first asset managers to launch active transparent ETFs using SEC Rule 6c-11 and convert mutual funds into ETFs in this fashion. The suite of tax-managed mutual funds to be converted consists of approximately USD20 billion in assets under management1. While the six mutual funds have delivered tax efficiency similar to what is available in the existing ETF market, their conversion will provide an additional tool to manage capital gains, supporting the funds’ goal to deliver higher after-tax returns by minimising tax impact. Following the conversion, the management fees of the six funds are expected to be reduced by 27 per cent, on average, from current levels on an asset-weighted basis. Dimensional intends to structure the conversion to be a tax-free event in which each investor’s mutual fund shares will convert to ETF shares.
The growing suite of Dimensional ETFs harnesses the power of Dimensional’s investment engine—a consistent investment philosophy combined with a value-added approach to implementation that the firm has been testing, refining, and advancing for nearly four decades.
“We’re pleased to broaden our ETF platform in a way that can help investors manage taxes even more efficiently,” says Dimensional Co-CEO and Chief Investment Officer Gerard O’Reilly. “We believe these strategies fill a unique space in the market, providing the benefits of passive investing, including low-cost diversified exposure to stocks, combined with the advantages of active investing, such as higher expected returns, flexible trading, robust daily portfolio management, and risk management.”
“We want our clients to have the tools they need to help investors meet their financial goals,” Co-CEO Dave Butler said. “Financial professionals use different vehicles to invest in the capital markets, including mutual funds, ETFs, separate accounts, and trusts. We’re committed to providing choices in how they access our investment expertise on behalf of their clients.”
In addition to the six new funds registered today, two of Dimensional’s previously announced Core Equity Market ETFs are expected to list on NYSE Arca on 18 November:
• Dimensional US Core Equity Market ETF (NYSE Arca: DFAU)
Net expense ratio: 0.12 per cent
• Dimensional International Core Equity Market ETF (NYSE Arca: DFAI)
Net expense ratio: 0.18 per cent