Nicole Hunter arrives in 'quarterback' position for the new ETF team at fund giant Dimensional

Nicole Hunter, Dimensional

Last October saw Nicole Hunter (pictured), an ETF veteran, with 20-plus years in the industry, arrive at USD601 billion asset manager, Dimensional Fund Advisors, as Head of Capital Markets. She will work with stakeholders across the firm to grow Dimensional’s ETF business, monitor primary markets’ activity and lead engagement with authorised participants.

Hunter spent 15 years with iShares, most recently as Head of US iShares Broker and Exchange Business Development. “I have spent over 20 years in the ETF industry, having done a number of things that are part of the growth of the ETF industry in the US, serving in roles that helped define and built out what ETF capital markets are,” she says.

“A typical asset manager that offers ETFs now knows that ETFs require a unique market structure but back when we started to build ETFs, at Barclays Global Investors, my job was to figure out what was needed to support the creation and redemption process that makes the whole product work and which touches every part of the business.”

She likens that role to being the ‘quarterback’ in the ETF team. “What's important is to understand what the ETF wrapper is,” she says. “It’s just a reflection of what’s inside and we expect the wrapper to follow suit to whatever the markets do.”

She is interested in where the ETF industry in the US is heading, particularly post the introduction of the ETF rule, 6c-11.

“The ETF rule was something I was involved with for a decade and it is exciting to see that come to fruition and to see firms like Dimensional bring their approach to the ETF markets,” she says. “It’s the next big thing for us to come into the market through our initial launch and conversion which will make us a top issuer. It’s exciting bringing active, transparent and systematic value investing within ETFs.”

Last August saw the firm announce it was to launch three new ETFs, which now have USD876 million in assets, and early 2021 saw them add to that with the conversion of six of its mutual funds, with total assets of USD30 billion at the time, into actively managed ETFs.

Hunter worked with the SEC over the lengthy gestation period of the ETF rule to help educate on how the ETF structure works. “All the nuances, details and effectively the plumbing,” she says. “The regulator wanted to make sure that investors were protected, and the ETF wrapper was relatively new, so there were lots of questions.”

At the same time, the ETF industry was seeing enormous growth, with new asset classes arriving in the sector. “It ended up being a long-term education session,” Hunter says. “But where it ended up is a good place, and I am excited to see where the industry goes to from here.”

Hunter had already acted as a consultant for Dimensional before the new job opportunity came up. “I was excited about a firm that cares about the details and puts clients first,” she says. “Impressive is an understatement. I wasn’t looking for another long-term relationship as I had just left one, but I couldn’t deny this as it’s the full package with the kind of product that is really thought through.”

Dimensional’s tag line is ‘putting financial science to work for investors by translating compelling research into real-world investment solutions’, and it’s that level of academic research that Hunter finds compelling.

“Now being on the phone with clients every day I understand that this is a partnership with the adviser that can stand the test of time,” she says. “We are going to offer mutual funds, Separately Managed Accounts and now ETFs, and we will have a robust ETF line up that will stand up with our other products.”

Hunter says that she has big plans for the firm and there will be a full suite of all the different strategies and solutions that clients are using. Dimensional’s offering so far has stayed firmly in the active fully transparent sector. “It’s the smart way to do it,” she says, with no plans to launch a semi-transparent product.

ESG investment is embedded within the firm already having launched strategies more than a decade ago. Hunter says that the firm has a ‘robust team’ looking at ESG strategies that make sense in different wrappers, whether that’s mutual funds, separate accounts and ETFs. “It’s important to define measurable ESG outcomes and what you are trying to solve,” she says.

That other current favourite ETF child, thematics, is also approached with restraint. “We are broad-diversified, systematic investors and so we have to ask if thematics are in the culture of our firm, Hunter says. The firm doesn’t believe that investment managers can time markets and does believe that the current price of a security reflects all the current and expected information, while thematic investment is, to some extent, all about timing markets.

“Dimensional is not afraid to go big if it’s the right thing to do,” Hunter concludes.
 

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