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DFA Plans to Roll Out a Commodity Fund

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Dimensional Fund Advisors (DFA) is expected to roll out the DFA Commodity Strategy by year-end, according to a report by Morningstar Advisor on Monday, August 23. Morningstar noted that DFA had registered with the Securities and Exchange to launch the new product on August 16.

In the filing, DFA said the fund will charge a 0.41% expense ratio, and indicated that a fee waiver will limit expenses to 0.55%. The fund will be available to investors only through DFA-approved financial advisors.

DFA’s David Plecha and Stephen Clark will manage the fund, investing in various commodity-linked derivative instruments. The fund will also hold a portfolio of short-term investment-grade (with ratings BBB and higher) government and corporate bonds in order to hedge away all foreign currency exposure.

Morningstar said that at present, the cheapest diversified commodities fund is the institutional share class of the PIMCO Commodity Real Return Strategy, with a 0.74% expense ratio. The least expensive diversified ETF is UBS E-TRACS DJ-UBS Commodity Index, at 0.50%.

The report said investors shoveled some $60 billion into commodity mutual funds and ETFs between January 2008 and July 2010. During the same period, U.S. stock mutual funds and ETFs hemorrhaged almost $53 billion.

Morningstar suggested that in offering the new fund, DFA acceded to the wishes of its large clients. But it had to put aside its skepticism about the long-term usefulness of commodities as a portfolio diversifier and inflation hedge. DFA, Morningstar said, bases most of its fund offerings on academic research demonstrating that small-cap value stocks tend to outperform over the long term.

Michael S. Fischer ([email protected]) is a New York-based financial writer and editor and a frequent contributor to


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