What You Need to Know
- The firm is planning four bond ETFs — two investment-grade bond ETFs, one TIPS ETF and one municipal bond fund.
- All four ETFs are actively managed and have total operating expenses ranging from 0.11% to 0.19%.
- In separate news, DFA is also planning to consolidate two tax-managed equity mutual funds.
Dimensional Fund Advisors has filed an application with the Securities and Exchange Commission to launch its first bond ETFs.
They are the Dimensional Investment Grade ETF, Short-Duration Investment Grade ETF, Inflation-Protected Securities ETF and Municipal Bond ETF.
All four bond ETFs will be actively managed and will trade on the NYSE Arca exchange, and all but one — the municipal bond ETF — may lend their portfolio securities to generate added income, according to a recent SEC filing.
The total operating expenses of the ETFs range from 0.11% for the Inflation-Protected Securities ETF to 0.19% for the Investment Grade ETF, after a fee waiver that lasts through at least February 2023 but reduces fees by just one basis point. The Short-Duration Investment Grade ETF and Municipal Bond ETF will have fees of 0.18% after the fee waiver.
David Plecha, DFA’s global head of fixed income portfolio manager, and Joseph Kolerich, the firm’s head of fixed income, Americas are listed as portfolio managers for all four ETFs. There’s an additional and different third manager for each of the funds: Lovell D. Shao for the Investment Grade ETF; Lacey Huebel for the Short-Duration ETF, Alan R. Hutchison for the Inflation-Protected Securities ETF and Travis A. Meldau for the Municipal Bond ETF.
The New Bond ETF Portfolios
The Investment Grade ETF and Short-Duration Investment Grade ETFs will invest in a broad portfolio of U.S. and foreign investment grade fixed income securities. The Investment Grade ETF will target securities that mature within 20 years with a weighted average duration within 15 months of the Bloomberg Barclays U.S. Aggregate Bond Index. Its duration was approximately 6.2 years as of Dec. 31, 2020.
The Short-Duration ETF will invest in securities that mature within five years, targeting a weighted average duration within 18 months of the weighted average duration of the ICE BofA 1-5 Year US Corporate & Government Index. The weighted average duration of that index was about 2.7 years as of year-end 2020.