BEST NEW INTERNATIONAL/GLOBAL EQUITY ETF
WINNER: Dimensional International Core Equity Market ETF (DFAI)
The entry of Dimensional Fund Advisors into the ETF market was widely anticipated for years, but it was only after the implementation of the ETF Rule that the firm made the move. The Dimensional International Core Equity Market ETF (DFAI) was one of three ETFs to roll out from the storied mutual fund issuer last year.
DFA’s approach is generally buy and hold, and it invests in broad asset classes and tilts the weightings of individual securities based on their exposure to the size, profitability and value factors. The fund holds roughly 2,600 securities, with Japan representing nearly a quarter of the fund, the U.K. at nearly 13% and Canada at roughly 10% of the portfolio as of the end of March.
The issuer has been known for its exclusivity, requiring rigorous continuing education for the advisors approved to sell its funds. That made its mutual funds somewhat difficult for the average investor to access if they weren’t working with an advisor who was authorized to sell the funds. However, with the ETF available, anyone can access it—and at a lower cost, given that a similar DFA mutual fund with $30 billion in assets charges an expense ratio of 0.28%.
DFAI was one of the most-talked-about launches of 2020, and delivers the coveted Dimensional investment strategy to investors in a brand new wrapper at an even lower price.
BEST NEW U.S. FIXED INCOME ETF
WINNER: Vanguard ESG U.S. Corporate Bond ETF (VCEB)
The Vanguard ESG U.S. Corporate Bond ETF (VCEB) isn’t the first corporate bond ETF to use environmental, social and governance criteria (ESG) to choose which issues to hold. In fact, it came to market more than three years after the current leader in the space, the $836 million iShares ESG Aware USD Corporate Bond ETF (SUSC).
But this is Vanguard we’re talking about. The company’s first foray into the ESG fixed income markets checks all the boxes for investors looking for comprehensive, low-cost exposure to this burgeoning asset class.
It’s not hard to see why VCEB was awarded the title of “Best New U.S. Fixed Income ETF” of 2020. The awards committee liked that VCEB only charges 0.12% per year, lower than the 0.18% expense ratio for the aforementioned SUSC, and a reasonable premium to Vanguard’s vanilla corporate bond product, the Vanguard Total Corporate Bond ETF (VTC), with its 0.05% expense ratio.
For that price, investors get exposure to a comprehensive basket of 1,854 bonds, about a quarter of the 6,686 bonds found in VTC.
Holdings are all investment-grade and consist of a combination of short-, intermediate- and long-term maturities. For the portfolio as a whole, VCEB is considered an intermediate-duration portfolio, with an average duration of 8.3 years and an average effective maturity of 11.9 years.
In its first six months on the market, VECB picked up $123 million in assets under management. Given the ETF’s specs and Vanguard’s track record, it’s not hard to imagine this becoming a multibillion-dollar fund in the future.