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DFA Launches 4 Active Equity ETFs Converted From Mutual Funds

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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.

IaaS is a form of cloud computing that provides virtualized computing resources over the internet, making workloads faster, easier, more flexible and more cost-efficient. BlackRock views the convergence of 5G and cloud computing as a single investment theme.

“Broader 5G connectivity leads to faster download speeds and the commercialization of technologies like autonomous driving and surgical robots — solutions which will create a surge of data creation and lead to increased demand for cloud-based data storage,” said Jeff Spiegel, Head of U.S. iShares Megatrend and International ETFs, in a statement.

The ETF, which has an expense ratio of 0.47%, is part of BlackRock’s Megatrends ETFs, which are designed to capitalize on structural shifts in the global economy over the next decade or two: technological breakthroughs, demographics and social change; rapid urbanization; climate change and resource scarcity; and emerging global wealth.

Invesco Launches 2 Tech-Focused ETFs, Waiving Fees Temporarily

Invesco Ltd. has launched two new passive ETFs that track two key technology industries — biotechnology and semiconductors — and it is waiving fees for both until mid-December. Both ETFs have zero fees through Dec. 17, 2021, after which their expense ratios will be 19 basis points.

The Invesco Nasdaq Biotechnology ETF (IBBQ) provides access to over 270 innovative biotechnology companies listed on The Nasdaq Stock Market and tracks the Nasdaq Biotechnology Index. Constituents include a high concentration of companies that were crucial to COVID-19 vaccines and treatments, as well as to the continued growth of genomics, wellness and advanced medical therapeutics. IBBQ is modified market cap-weighted and includes large-, mid- and small-cap companies.

The Invesco PHLX Semiconductor ETF (SOXQ) tracks the PHLX Semiconductor Sector Index, which is also maintained by the Nasdaq. The index includes the 30 largest names in semiconductor design and manufacturing for nearly 30 years, before the advent of smartphones and widespread adoption of laptops.

“There has never been a more relevant moment for these two themes, and we are happy that we could ensure investors now have the most cost-effective way to invest in Nasdaq-listed companies through indexes that have been live for almost three decades,” said Anna Paglia, global head of ETFs & Indexed Strategies at Invesco, in a statement.

KraneShares Adds Bloomberg Barclays China Bond Inclusion ETF

Krane Funds Advisors LLC (KraneShares), a global asset management firm known for its China-focused ETFs, has launched the KraneShares Bloomberg Barclays China Bond Inclusion ETF (KBND).

The fund offers investors access to renminbi-denominated securities included in the Bloomberg Barclays Global Aggregate Index, which completed its inclusion of those securities in December 2020, driving over $150 billion of new money into China’s onshore bond market and expanding the universe of international investors participating in the market, according to analysts’ estimates. Its expense ratio is 0.50%.