Butler couldn’t talk about expected fees on Dimensional’s ETFs. But in looking for clues about potential costs based on similar, existing strategies within its mutual funds, the company’s two U.S. core equity portfolio mutual funds charge net expense ratios of 0.17% and 0.20%; its international core equity portfolio has a net expense ratio of 0.28% and its emerging markets core equity portfolio charges 0.48%. (The company cut fees across its mutual fund lineup earlier this year.)
Nor could Butler comment on potential portfolio overlap between existing mutual funds and ETFs that share the same investment strategy.
For the most part, all four mutual funds just mentioned have slightly underperformed their categories on an annualized basis during time periods ranging from one to 10 years, according to Morningstar. That’s because two of Dimensional's bedrock factors—size (i.e., small-cap) and value—have underperformed large-cap and growth stocks for an extended time period. Nonetheless, Morningstar analysts praise the company’s stewardship of investor capital.
Dimensional is bringing its active management style to ETFs at a time when many large traditional asset managers have lined up to launch—some have already launched—semi-transparent ETFs that disclose their holdings on a quarterly basis like mutual funds do. Dimensional’s ETFs will be fully transparent and their portfolios will let it all hang out on a daily basis, as has been customary with ETFs.
“We have a broadly diversified set of portfolios with a significant number of securities in our portfolios, so the idea of being transparent isn’t a problem from our perspective,” Butler said.
Semi-transparent ETF structures have arisen due to fears by asset managers that daily portfolio disclosures would let sophisticated investors front-run their trades and copy their proprietary strategies. Butler noted that Dimensional’s funds typically have low portfolio turnover, which minimizes those risks.
He expects Dimensional’s three ETFs to launch later this year, and indicated that additional ETFs could eventually be in the works.
“We’re in constant conversation with our clients around what they need in terms of delivering to their end client, and we’ll continue those conversations,” Butler said.