Dimensional Fund Advisors intends to convert six sustainable mutual funds into ETFs in early 2021
Dimensional Fund Advisors (DFA) announced the launch of two Equity ETFs on November 18, 2020. The two core equity ETFs, the Dimensional US Core Equity Market ETF (DFAU) and the Dimensional International Core Equity Market ETF (DFAI), offered at 12 and 18 basis points, respectively, are now listed for trading on the NYSE Arca. To complement these two actively managed funds, Dimensional also plans to launch an Emerging Core Equity Market ETF in early December. DFA’s first ETF listings, these offerings will be expanded in early 2021 with the launch of six actively managed sustainable (refer to definitions below). ETFs that will benefit from the conversion of assets from six corresponding mutual funds. Based on data as of October 31, 2020, these funds will add $26.1 billion in assets to the current universe of 141 sustainable ETFs with $70.0 billion, including 35 actively managed sustainable ETFs with $20.0 billion in assets or 29% of assets sourced to ETFs.
The conversion of the six funds into ETFs will also result in expense ratio reductions ranging from 17% to 56% in the case of the Tax-Managed US Equity Portfolio. Approved by their boards as of February 28, 2020, the existing mutual funds and the new corresponding ETFs are listed below. Refer to Table 1.
|Existing Mutual Fund||AUM($)||Current Expense Ratio (bps)||New ETF||New ETF Expense Ratio (bps)|
|Tax-Managed US Equity Portfolio||4,312.1||18||Dimensional US Equity ETF||8|
|Tax-Managed US Small Cap Portfolio||2,646.2||40||Dimensional US Small Cap ETF||30|
|Tax-Managed US Targeted Value Portfolio||3,750.4||20||Dimensional US Target Value ETF||30|
|TA US Core Equity 2 Portfolio||9,639.0||20||Dimensional US Equity 2 ETF||16|
|Tax-Managed International Value Portfolio||2,474.7||45||Dimensional International Value ETF||30|
|Tax World ex US Core Equity Portfolio||3,263.3||30||Dimensional World ex US Core Equity 2 ETF||25|
According to their prospectus, DFA, in addition to any other criteria used for assessing value, profitability, or investment characteristics, may also adjust the representation in the portfolio of an eligible company, or exclude a company, that is believed to be negatively impacted by environmental, social or governance factors (including accounting practices and shareholder rights) to a greater degree relative to other issuers.
These are not the only funds advised by DFA pursuant to sustainable investment practices dominated by an ESG Integration approach that combines ESG integration as well as exclusions. As of September 30, 2020, DFA managed 58 funds, including the six scheduled for conversion, with $286.9 billion in net assets. Representing 10% of sustainable mutual fund and ETF assets under management ($2.8 trillion), DFA ranks 4th among 184 firms offering formally designated sustainable investment products.