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Portfolio > ETFs

DFA Joins ETF Party, but Is It Too Late?

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Dimensional Fund Advisors plans to launch three active ETFs later this year, after filing registration statements for the funds with regulators last week.

News of DFA’s plans to launch ETFs has sparked renewed focus on why the factor-focused investment shop — which to date has sold its mutual funds to retail investors exclusively through financial advisors — did not move earlier into the $4.4 trillion market for exchange-traded funds. 

It’s about time. 10 or so yrs ago the head of PowerShares product development went to visit them in Santa Monica but majority had no interest in ETFs. Wonder where they[‘d] be today if they had,” said Ed McRedmond, CEO of the consulting group etfEd Advisory, on Twitter last week.

“I visited them on this topic in 2007, when I was CIO of Quant/Indexing at @NorthernTrust, together w/other senior execs. No interest then either,” tweeted Steven Schoenfeld, founder of BlueStar Indexes, in a response to McRedmond.

The three proposed DFA ETFs, which will be actively managed, are the Dimensional US Core ETF, Dimensional International Core ETF and Dimensional Emerging Markets Core ETF.

DFA has about $506 billion in client assets as of May 31. Its funds had roughly $4.5 billion in net flows last year, according to Morningstar.

But this year, the Austin, Texas-based firm’s fund outflows already have gotten close to that level. Plus, its outflows over the past 12 months topped $19.5 billion as of May 31, the fund research group says. 

DFA’s announcement of its filings came about one year to the date after former executive Eduardo Repetto was hired by American Century to help it roll out ETFs and other products under the Avantis Investors brand.  

“For nearly four decades, we have built our investment offering thoughtfully and systematically. We take the time to understand clients’ evolving needs … and ultimately aim for both a better investment experience and higher returns,” DFA Co-CEO Dave Butler said in a statement.

“The long-term outperformance and high survivorship rate of our solutions compared to the industry are testament to the value provided to our clients,” Butler said.

Co-CEO’s View

 “As ETFs have become more important for servicing their clients, our clients have asked repeatedly, ‘Can you guys launch ETFs?’” said Co-CEO Gerard O’Reilly in a recent interview with Bloomberg. “We see them as a great compliment to our mutual funds.”

Also, the regulatory landscape has made it easier to launch exchange-traded funds  namely through the Securities and Exchange Commission’s so-called ETF Rule in September. So far in 2020, more than 65 new actively managed ETFs have come to market. 

As for whether or not the ETFs  which investors should be able to buy on their own  might ruffle the feathers of some advisors who emphasize DFA mutual funds in their practices, “we remain focused on financial professionals and their ability to serve clients,” said Marlene Lee, head of Investment Solutions, in an interview with ThinkAdvisor.

“With the evolution of the ETF space, we can now combine all the features of our mutual funds into our ETF structure,” Lee added. 

— Check out ‘Be a Risk Taker,’ Says DFA’s COO on ThinkAdvisor.


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