Dimensional Adds 3 ETFs

The new ETFs follow the same strategies as three of the firm’s mutual funds with $31.2 billion.

Dimensional Fund Advisors launched a trio of actively managed ETFs following in the footsteps of three multibillion strategies in existing mutual funds. The issuer is also preparing to convert the last of its tax-managed mutual funds to ETFs. 

The Dimensional US High Profitability ETF (DUHP), the Dimensional US Real Estate ETF (DFAR) and the Dimensional US Small Cap Value ETF (DFSV) all debuted on the NYSE Arca Thursday. DUHP will start with an expense ratio of 0.22%, while DFSV will start with a 0.31% expense ratio. Both funds have an initial fee waiver of 2 basis points in effect until the end of February 2023. DFAR charges 0.19% on launch and carries a 3 basis point fee waiver until the end of next February. 

The three funds are all actively managed, and share managers and strategies with similar mutual funds in the Dimensional lineup. 

DUHP’s counterpart mutual fund DURPX has $5.8 billion in assets and has outperformed the Russell 1000 Index, with a 16.75% annualized return since inception against the benchmark’s 16.29% return. It trailed the Russell 1000 by 2.5% in 2021. 

DFAR’s counterpart DFREX has $10.8 billion in assets and has annualized returns of 10.35% in the past decade against the 9.28% return of its benchmark Dow Jones U.S. Select REIT Index, but trailed the benchmark by 4% last year. 

DFSV’s mutual fund counterpart is the $14.6 billion DFSVX, which has returned 11.41% against its benchmark Russell 2000 Value Index’s 10.64% return in the past 10 years. It is the only mutual fund of the three to beat its benchmark last year, returning a striking 39.84% against the benchmark’s 28.27%. 

Dimensional is launching these funds a day after filing to convert its $8.3 billion Tax-Managed US Marketwide Value Portfolio mutual fund into an ETF. The firm expects to close that conversion on or around May 6. The move will bring the last of the firm’s tax-managed mutual fund strategies into the ETF wrapper after Dimensional converted the first four last June. 

In an interview, Dimensional ETF Investment Strategist Anthony Caruso said that mutual fund conversion is the last currently planned for the firm. Instead, it will focus on offering its strategies across both wrappers. 

“We felt we could better deliver that [tax management], and our clients agreed, in an ETF wrapper, by having that additional lever to help manage some of those capital gains. That's the idea behind why these are net new launches versus conversions,” he said. 

 
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