(Bloomberg) - Quant-investing heavyweight Dimensional Fund Advisors is stepping up its incursion into the $7.2 trillion U.S. exchange-traded fund industry.
The Austin, Texas-based money manager will launch its first four fixed-income funds on Tuesday, and a filing with the Securities and Exchange Commission revealed it’s planning 10 more stock ETFs. That will boost the firm’s lineup to 23 ETFs in total.
The major expansion underscores Dimensional’s commitment to its ETF business after enjoying rapid success with its first few funds. The David Booth-founded manager amassed $1 billion in four months, before converting $29 billion in mutual fund assets to the ETF wrapper.
From being a late entrant to the industry in November 2020, it’s now on the cusp of becoming one of the top 10 issuers by assets with $44 billion, according to data compiled by Bloomberg. Dimensional manages about $653 billion overall, including $120 billion in fixed income.
The push into the ETF industry has largely been driven by client demand, according to Dimensional co-Chief Executive Officer Gerard O’Reilly.
“What we’ve heard from our clients is that they require a full ETF lineup from us to satisfy their end customers,” O’Reilly said in a phone interview. “What we want to be able to provide is the full suite, so that it’s sort of a choose-your-own-adventure. If you like our investment philosophy, great. You want to consume through ETFs, no worries. You want to consume through mutual funds, that’s fine, too.”
The funds launching Tuesday are all actively managed and carry fees between 0.11% and 0.19%. They are:
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Dimensional Core Fixed Income ETF (ticker DFCF)
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Dimensional Short‐Duration Fixed Income ETF (DFSD)
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Dimensional National Municipal Bond ETF (DFNM)
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Dimensional Inflation‐Protected Securities ETF (DFIP)
The four strategies were chosen to take advantage of what O’Reilly sees as a coming wave of growth in the systematic fixed-income space amid an ongoing global hunt for yield.
“It feels very similar to a decade ago, when systematic equities were gaining a lot of traction,” O’Reilly said. “We’re going to see a lot of growth in systematic fixed income over the next decade. Hopefully we’ll be a part of that growth.”
Meanwhile, if approved, the planned range of new equity ETFs -- also actively managed -- will cover U.S. and international stocks of varying market capitalizations. Along with the fixed-income products launching Tuesday, they will rely on organic growth, rather than converting mutual fund assets. They will be:
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International Core Equity 2 ETF
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Emerging Markets Core Equity 2 ETF
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US Small Cap Value ETF
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International Small Cap ETF
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International Small Cap Value ETF
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Emerging Markets Value ETF
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US High Profitability ETF
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International High Profitability ETF
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Emerging Markets High Profitability ETF
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US Real Estate ETF
Katie Greifeld
