Dimensional Fund Advisors Significantly Expands ETF Offering
Unveils plans to convert six tax-managed mutual funds into new ETFs, and targets November 18 for planned listing of its first two Dimensional Core Equity Market solutions
Austin, TX—November 17, 2020—Dimensional Fund Advisors, a global leader in systematic factor investing, today filed a preliminary registration statement with the Securities and Exchange Commission to launch six new actively managed, tax-efficient exchange-traded funds (ETFs). Additionally, it 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 November 18. 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 $26 billion in assets under management.1 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 minimizing tax impact. Following the conversion, the management fees of the six funds are expected to be reduced by 27%, on average, from current levels on an asset-weighted basis.2 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 planned conversion includes the following mutual funds and new ETFs:
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,” Dimensional Co-CEO and Chief Investment Officer Gerard O’Reilly said. “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 November 18:
- • Dimensional US Core Equity Market ETF (NYSE Arca: DFAU)
- Net expense ratio: 0.12%
- • Dimensional International Core Equity Market ETF (NYSE Arca: DFAI)
- Net expense ratio: 0.18%
Dimensional also plans to launch an Emerging Core Equity Market ETF in early December.
Dimensional Core Equity Market solutions offer broadly diversified, all cap core exposure, with an emphasis on securities with higher expected returns using variables such as company size, relative price, and profitability. The Core Equity Market ETFs aim to achieve a light level of tilt from market cap weights and low tracking error to the market through a daily managed approach.
1As of October 30, 2020
2Asset-weighted average reduction is based on assets as of September 30, 2020
ABOUT DIMENSIONAL FUND ADVISORS
Dimensional is a leading global investment firm that has been translating academic research into practical investment solutions since 1981. Guided by a strong belief in markets, we help investors pursue higher expected returns through a systematic investment process that integrates research insights with advanced portfolio design, management, and trading, while balancing tradeoffs that can impact returns. Dimensional is headquartered in Austin, Texas, and has offices across North America, Europe, and Asia. As of September 30, 2020, Dimensional manages $527 billion for investors worldwide.
This material is for informational purposes only. A registration statement about six new series of the Dimensional ETF Trust has been filed with the Securities and Exchange Commission but has not yet become effective. Information about the series is not complete and may be changed. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state or jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Prospective investors should consult their professional advisors as to the suitability of any investment in light of their particular circumstances and applicable citizenship, residence, or domicile. Certain products offered by Dimensional Fund Advisors may not be available to all entities or persons.
Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at us.dimensional.com. Copies of the final prospectus can be obtained from Dimensional. Please note that a preliminary prospectus is subject to change. A link to the red herring prospectus for the six new series of the Dimensional ETF Trust can be found here.
ETF shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell ETF shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
Risks include loss of principal and fluctuating value. Small cap securities are subject to greater volatility than those in other asset categories. Value investing is subject to risk, which may cause underperformance compared to other equity investment strategies. International investing involves special risks, such as currency fluctuation and political instability. Investing in emerging markets may accentuate these risks. These risks are described in the Principal Risks section of the prospectus. Dimensional funds are distributed by DFA Securities LLC.