Dimensional adds three multifactor US equity ETFs

Mar 4th, 2022 | By | Category: Equities

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Dimensional Fund Advisors has launched three new ETFs that systematically harvest factor risk premia within the small-cap value, large-cap profitability, and real estate segments of the US equity market.

Gerard O’Reilly, co-CEO and Chief Investment Officer, Dimensional Fund Advisors

Gerard O’Reilly, co-CEO and CIO of Dimensional Fund Advisors

Listed on NYSE Arca, the fully transparent, actively managed ETFs replicate strategies that Dimensional has offered for decades within its mutual fund line-up.

Driven by clearly defined quantitative rules, Dimensional’s approach employs modest portfolio tilts away from conventional market cap weights based on targeted factor exposures. Each ETF is designed to emphasize long-term drivers of expected returns while balancing risk through broad diversification across companies and sectors.

Gerard O’Reilly, co-CEO and CIO of Dimensional Fund Advisors, commented: “We continue to build out Dimensional’s ETF suite which not only offers the benefits of passive strategies such as broad diversification, low turnover, and transparency but also provides the advantages of active, flexible portfolio management to continually target higher expected returns over traditional indexes.

“These areas of the market are core to our expertise, as Dimensional has been researching and managing small-cap value, high profitability, and real estate strategies for decades.”

The Funds

The Dimensional US Small Cap Value ETF (DFSV US) begins with a universe of small-cap stocks (defined as companies ranked beyond the 1,000 largest US-listed firms) with value characteristics (based primarily on price to book value). The fund delivers broad exposure to this universe while tilting weights in favour of smaller companies with value and profitability (based on earnings to book value or profits to book value) characteristics. The ETF comes with an expense ratio of 0.31%.

The Dimensional US High Profitability ETF (DUHP US) begins with a universe of large-cap stocks (defined as the 1,000 largest US-listed companies) with profitability characteristics. The fund delivers broad exposure to this universe while tilting weights in favour of companies with low-size, value, and profitability characteristics. The ETF comes with an expense ratio of 0.22%.

The Dimensional US Real Estate ETF (DFAR US) begins with a universe of real estate investment trusts (REITs) as well as real estate operating companies of any market capitalization. The fund delivers broad exposure to this universe while tilting weights to enhance exposure to low-size, value, profitability, liquidity, and momentum factors. The ETF comes with an expense ratio of 0.19%.

Dimensional unveiled its first fixed income ETFs in November with the listing of four funds that systematically harvest premia attributable to credit and term factors within USD aggregate, short-duration USD aggregate, municipal, and inflation-protected bond markets. The ETFs have been well received by investors, accumulating $1 billion in assets within two months of their debut.

The firm also has a further seven transparent, actively managed ETFs in the pipeline. The proposed funds will offer exposure to different segments of the global developed ex-US and emerging market equity universes while tilting weights based on known drivers of higher expected returns.

The fund filings reference the following:

Dimensional International Core Equity 2 ETF
Dimensional Emerging Markets Core Equity 2 ETF
Dimensional International Small Cap ETF
Dimensional International Small Cap Value ETF
Dimensional Emerging Markets Value ETF
Dimensional International High Profitability ETF
Dimensional Emerging Markets High Profitability ETF

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