Booth’s Dimensional Converts $29 Billion of Mutual Funds to ETFs

davfor

Dimensional Fund Advisors just became one of the biggest players in the $6.5 trillion exchange-traded fund arena.

In a milestone moment for the money management industry, the $637 billion quant pioneer founded by David Booth has converted four equity mutual funds with $28.8 billion of assets into ETFs.

Link

Sven

There are 2 more than the link listed.

International market core ETF,DFAI
Emerging market core ETF, DFAE

In addition, these are fairly new ETFs. So pay attention to the trading volume for the bid-ask spread. Just checked few of DFA ETFs and they are trading in less than 90-240,000 shares whereas the equivalent Vanguard and iShares ETFs are trading at 10X higher, millions shares.

Good fund family but not so assessable in the past without using specific advisors.

Observant1

The former DFA CEO established Avantis Investors in 2019 and poached some key DFA personnel.
Avantis launched five ETFs in September 2019 and three more in 2020.
They also offer separate mutual funds which are essentially the same as these ETFs.
Link

Sven

Thank you. Now there are more choices for retail investors.

Here is a list of Avantis ETFs.
https://etf.com/channels/avantis-etfs

BenWP

I am also a fan of the Aventis funds. DFA attracts massive assets, but their performance compared to funds from the other big boys seems so-so. The NY Times lists performance figures for the 10 largest funds in the day’s given category and the DFA entry usually trails. EM is one example. Maybe the former employees have more freedom to innovate and to take more risks in their new shop. FWIIW, I’ve never heard of anyone trying to get into a DFA fund without having to use an advisor. The Aventis domestic, international and EM ETFs are all beating their respective indices, monthly, YTD, and 1 year since inception. I own AVUV.

msf

DFA's value proposition, no pun intended, is that value performs better over the long term. Further, that the relative underperformance of value with respect to growth in the past three years is unprecedented.
https://www.dimensional.com/us-en/insights/an-exceptional-value-premium



Of the ten largest EM funds (per M* screener), two are DFA funds. They are the only two classified as value funds. The more value leaning (nearly off the chart) of the two, DFEVX, has done the worst. The other DFA fund DFCEX, still a value fund, has outperformed VEIEX (another of the 10 largest) over 1, 5, 10, and 15 years.

Given all three funds' relatively poor showings this might suggest (if one can factor out the value effect) that EM is one category where funds can do better by not following an index.

With respect to AVUV, a cursory look shows this to be a (relatively) high beta fund that has outperformed as the market rotated into value. I'll watch how it does over a whole cycle.
https://www.etf.com/AVUV#fit

Sven

I understand that neither DFA nor Adventis ETFs are index based funds. Some elements of factor based are used, and thus they are considered actively managed. Just want to learn more information on their strategies.

BenWP

AVDE, the Aventis international etf holds 3600 stocks, and AVUV almost 1100, so for me, at least, they are close to being index funds. Another SCV I hold, CALF, has only 100 stocks, selected according to proprietary rules.

@msf is right about the recent success of value. It may not last. I may have had an option to choose a DFA fund in my retirement account, but I never pulled the trigger.

davidrmoran

>> the relative underperformance of value with respect to growth in the past three years is unprecedented.

By my read, of the (difficult for me) Fidelity $10k-growth charting for VONE vs VONV, much less VONG, the underperformance holds for the three years before that, and also the three years before that.

msf

I should have said: the magnitude of the relative underperformance of value with respect to growth in the past three years is unprecedented. This is clear from DFA's bar chart reproduced above. Also evident from that chart is value's relative but much smaller underperformance in the preceeding seven years.

For completeness, here's exactly what DFA wrote:

This three-year run [2017-2020] warrants further inspection—just how uncommon was this value premium magnitude? Literally unprecedented, as illustrated by the rolling three-year value premiums in Exhibit 2. Of the 1,093 rolling observations in US history, the three years ending in June 2020 ranked dead last. This is the very definition of an outlier.

---

ᴇxʜɪʙɪᴛ 2

Back of the Pack
Rolling 3-year annualized return differences for value versus growth,
US market, June 1929–June 2020

msf

Sven said:

I understand that neither DFA nor Adventis ETFs are index based funds. Some elements of factor based are used, and thus they are considered actively managed. Just want to learn more information on their strategies.

Loaded terminology, "index based".

Vanguard used to be adamant that its tax managed funds were not index funds. For example, in this 2015 paper, Vanguard meticulously represents broad-market index funds and tax-managed funds as separate albeit similar groups of funds.

Yet it was pure marketing. Vanguard created VEA as a share class of then Tax-Managed International VTMGX. At the time, ETFs were required to be index funds. Still Vanguard insisted that this tax-managed fund when marketed in its OEF form was not an index fund.

DFA has similarly tried to have its cake and eat it too. It promoted its funds as actively managed index funds. By this it meant that active management was layered on top of its proprietary indexes to do better. For example, it is flexible on when it sells shares of a company removed from an index and when it buys shares of a company newly added to an index.

As M*'s John Rekenthaler wrote earlier this year: Once considered an index provider, DFA now describes itself as an active manager because of the changes that it makes to its theoretical indexes when converting them into portfolios. To coin a phrase, I will call such a practice "selective indexing."

He went on to observe: Most of the [outperformance of DFA relative to cap-weighted funds] likely owes to differences in index construction--DFA uses its own proprietary benchmarks, rather than those of outside parties--than to the use of selective indexing.

https://www.morningstar.com/articles/1017351/what-to-know-indexing-with-a-twist

All of which gets us back to index-based. DFA funds are not based on cap-weighted indexes. But they are based on DFA indexes. I would call them index-based. Others may hot. In the end, as the Bard wrote, what's in a name?