What You Need to Know
- The DFA ETFs follow the firm's ETFs launched in November and December that now have about $1 billion in assets.
- T. Rowe Price has added its fifth active equity ETF, which is a nontransparent version of a similar mutual fund.
- Invesco launches two tech-focused ETFs, waiving fees temporarily.
Dimensional Fund Advisors has launched four active equity ETFs on the New York Stock Exchange. All four are conversions from mutual funds and fully transparent and all four have lower fees than their predecessor mutual funds. The fee discounts average 27% and their combined assets are nearly $29 billion.
The new fund ETF launches are as follows:
- Dimensional U.S. Equity ETF (DFUS, 0.11% total annual operating expenses)
- Dimensional U.S. Small Cap ETF (DFAS, 0.34%)
- Dimensional U.S. Targeted Value ETF (DFAT, 0.34)
- Dimensional U.S. Core Equity 2 ETF (DFAC, 0.19%)
The firm, whose mutual funds are distributed exclusively through financial advisors, launched its first ETFs in November and December, which have amassed a cumulative $1.5 billion in assets total since then, according to Marlena Lee, head of investment solutions at DFA, but those ETFs were not fund conversions. She said the ETF launches respond to advisor requests.
DFA has plans to launch two more equity ETFs converted from mutual funds around September, said Lee. They are the the Dimensional International Value ETF (converted from Tax-Managed International Value Portfolio) and the Dimensional World ex US Core Equity ETF (converted from TA World ex US Core Equity Portfolio) and the firm is also considering fixed income ETFs.
“We expect to have a full lineup of ETFs to offer clients alongside our mutual fund offerings and expanded separately managed accounts platform,” said Co-CEO and Chief Investment Officer Gerard O’Reilly, in a statement.
These DFA launches could help slow or reverse the firm’s asset outflows, which totaled $33.27 billion through April 30, according to Morningstar. DFA cut fees on 77 mutual funds in February 2020 and on 33 funds in February 2021 by 8% and 15%, respectively, on an asset-weighted basis.
T. Rowe Prices Launches New Active U.S. Equity Fund
T. Rowe Price has taken a different approach to ETF launches than DFA. Rather than converting some mutual funds to ETFs, the firm has launched active ETFs that are similar to its active mutual funds, which continue to operate.
It launched four such ETFs in August 2020 and last week launched a fifth, the T. Rowe Price U.S. equity Research ETF (TSPA) which is similar to the T. Rowe Price U.S. Equity Research Fund (PRCOX).
Like its four predecessors, the ETF does not reveal its holdings on a daily basis as most ETFs do. Instead it uses a proprietary methodology that reveals proxy portfolios consisting of a basket of securities designed to closely track the daily performance of the fund’s actual holdings with a minimum 80% overlap of portfolio weightings at the beginning of each trading day and reveals actual holdings on a quarterly basis with a 15-day lag.
The new T. Rowe Price ETF seeks long-term capital growth by investing in U.S. large-cap stocks through active stock selection based on the “best ideas” of the firm’s equity research analysis. Its three portfolio managers, Ann Holcomb, Jason Polun and Josh Nelson, are also portfolios of the ETF’s sister mutual fund. The ETF has a net expense ratio of 0.34% compared with 0.45% for its affiliated mutual fund.
BlackRock Adds Cloud Computing and 5G Multisector ETF
BlackRock has introduced the iShares Cloud and 5G Multisector ETF (IDAT), an ETF that concentrates on the handful of firms that Morningstar’s equity research team believes are best positioned from the evolution of infrastructure as a service (IaaS) and 5G technologies.