Dimensional Files Application for ETF Share Class Exemptive Relief
Dimensional Fund Advisors, the industry's largest active ETF issuer, filed an application for exemptive relief with the Securities and Exchange Commission (SEC) seeking permission to offer ETF share classes of its US mutual funds, which represent approximately $400 billion in investor assets.
In the filing, Dimensional outlines how it believes this structure could benefit mutual fund class and ETF class shareholders. Mutual fund class shareholders could benefit through lower transaction costs and greater tax efficiency. New ETF class shareholders could also benefit from advantages offered by this structure, including more efficient rebalancing using mutual fund cash flows and lower total portfolio transaction costs, among other benefits of scale passed along to investors.
"Many advisors and institutions continue to ask for new investment strategies to be efficiently delivered as both mutual funds and ETFs," said Gerard O'Reilly, Co-CEO and Chief Investment Officer. "We believe access to systematic active solutions through new ETF share classes can provide additional cost efficiencies and tax management benefits while targeting higher expected returns for both mutual fund and ETF investors. We look forward to further engaging with the SEC to better address this need."
Dimensional primarily serves investors that access Dimensional funds through financial advisors, intermediaries, and institutions. The firm began offering low-cost systematic strategies to institutions in 1981 and was an early supporter of industry shifts towards more investor-centric fiduciary and independent advice. Today, the firm serves an extensive network of financial intermediaries and institutions that represent hundreds of thousands of investors and households across the US.
"An ETF share class would allow advisors and institutions more choice in tailoring portfolios to better address investors' individual needs," said Dave Butler, Co-Chief Executive Officer. "Dimensional is committed to further advancing industry innovation on behalf of the financial professionals we serve and providing more ways to access low-cost, thoughtfully constructed investment solutions."
Dimensional's actively managed strategies go beyond indexing by using a flexible, daily approach to implementation while retaining many of the advantages of traditional passive investing, including low fees and broad diversification. Dimensional launched its first ETFs in November 2020, following the release of the SEC's "ETF Rule" (Rule 6c-11). This regulatory change permitted Dimensional to bring the consistent investment process the firm has refined and advanced for more than 40 years to ETFs for the first time. Dimensional now offers 31 ETFs with approximately $95 billion in AUM and continues to build this suite alongside the firm's mutual fund and SMA offerings.
As new empirical research, technology, and regulations have advanced, so too have the firm's portfolio design and vehicle offerings. Seeking exemptive relief to offer an ETF share class is the next step in evolving Dimensional's value-added investment proposition, which has been solely focused on delivering the best possible solutions and client experiences since the firm's founding over four decades ago.
ABOUT DIMENSIONAL FUND ADVISORS
Dimensional is a leading global investment firm that has been translating academic research into practical investment solutions since 1981. Guided by a strong belief in markets, we help investors pursue higher expected returns through a systematic investment process that integrates research insights with advanced portfolio design, management, and trading while balancing tradeoffs that can impact returns. Dimensional is headquartered in Austin, Texas, and has 14 global offices across North America, Europe, Asia, and Australia. As of March 31, 2023, Dimensional manages $614 billion for investors worldwide. For more information, please visit dimensional.com
DISCLOSURES
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at dimensional.com. Dimensional funds are distributed by DFA Securities LLC.
This information is not meant to constitute investment advice, a recommendation of any securities product or investment strategy (including account type), or an offer of any services or products for sale, nor is it intended to provide a sufficient basis on which to make an investment decision. Investors should consult with a financial professional regarding their individual circumstances before making investment decisions.
Risks include loss of principal and fluctuating value. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost.
ETFs trade like stocks, fluctuate in market value, and may trade either at a premium or discount to their net asset value. ETF shares trade at market price and are not individually redeemable with the issuing fund, other than in large share amounts called creation units. ETFs are subject to risks similar to those of stocks, including those regarding short-selling and margin account maintenance. Brokerage commissions and expenses will reduce returns.
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