Dimensional Fund Advisors is directly getting into the exchange-traded fund business, though it already has been a behind-the-scenes player for five years.
The Austin, Texas-based investment firm today announced it filed with the Securities and Exchange Commission for three actively managed ETFs offering broadly diversified, all-cap core equity exposure to U.S., non-U.S. developed and emerging markets.
Since 1981, the company has devised rules-based, multifactor strategies influenced by the research of economists Eugene Fama and Kenneth French. Its strategies seek to isolate so-called dimensions, or factors—such as small capitalization, lower valuations and higher profitability—that it believes lead to market outperformance over the long haul.
Dimensional’s strategies have been offered via mutual funds, separate accounts and commingled trusts, and the company has developed a loyal following among many financial advisors. Its mutual funds have an aura of exclusivity about them, primarily because investors can buy them only through financial advisors. The firm has $454 billion in assets under management but, according to published reports, that figure was close to $580 billion toward the end of last year.
And since 2006, Dimensional has collaborated with John Hancock by managing some of that firm’s mutual funds, and that relationship expanded in 2015 when John Hancock launched the first of what are now 15 multifactor ETFs based on Dimensional indexes that emphasize the size, value and profitability factors.
But Dimensional is set to emerge from the background and will put its name on the marquee of the following products that will emphasize the same aforementioned three factors: the Dimensional US Core ETF, Dimensional International Core ETF and Dimensional Emerging Markets Core ETF.
The ticker symbols and expense ratios haven’t been announced.
For Dimensional, putting its investment strategies into the ETF format will expand its reach with investors and broaden its product relationship with advisors.
“We have a great feedback loop with advisors and our institutional clients, and we’ve had conversations with them over the past year around their interest in us offering our investment approach in an ETF wrapper,” said Dave Butler, Dimensional’s co-chief executive officer.
“There’s an evolution in wealth management,” he added. “The need to have active mutual funds, separate accounts and ETFs is a reality of the business today. We have been doing this for 40 years and we know how to add value from an investment perspective in a systematic way, and we want to be able to do that in various wrappers that give advisors flexibility to deliver on their client portfolios.”