Dimensional launches US large-cap multi-factor ETF

Nov 6th, 2023 | By | Category: Equities

Dimensional Fund Advisors has introduced a new fully transparent active ETF that systematically harvests multiple factor risk premia within the US large-cap equity market.

Dimensional launches US large-cap multi-factor ETF

Dimensional has rolled out a new active ETF that systematically harvests risk premia within the US large-cap market.

The Dimensional US Large Cap Vector ETF (DFVX US) has been listed on NYSE Arca with an expense ratio of 0.22%.

Driven by clearly defined quantitative rules, the fund selects companies with lower relative value (based on price to book value, price to cash flow, or price to earnings), and higher profitability (based on earnings to book value or profits to book value) characteristics.

The approach then employs modest portfolio tilts away from conventional market cap weights based on three targeted factor exposures: smaller capitalization, lower value, and higher profitability.

The ETF is designed to emphasize these long-term drivers of expected returns while balancing risk through broad diversification across sectors and individual stocks.

The portfolio managers may also increase or reduce the ETF’s exposure to a particular company based on shorter-term considerations such as that firm’s price momentum.

Dimensional offers a further two ETFs targeting US large-cap equities: the $3.3 billion Dimensional US High Profitability ETF (DUHP US), which has an expense ratio of 0.21%; and the $1.0bn Dimensional US Large Cap Value ETF (DFLV US), which costs 0.22%. DUHP and DFLV initially select stocks with high profitability and lower value characteristics, respectively, before tilting their constituent weights to capture multiple factor risk premia.

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