Booth’s Dimensional Makes $700 Million Splash in ETF Debut

Quantitative investment firm Dimensional Fund Advisors is already making waves in the $5.9 trillion exchange-traded fund market.

The $601 billion manager founded by David Booth has amassed over $700 million among its three debut ETFs, which launched in November and December, according to data compiled by Bloomberg. The trio has absorbed roughly $337 million so far in 2021.

DFA announced its attention to shift $20 billion from its mutual funds into ETFs last November, and it’s possible this could be boosting flows. But trading patterns suggest organic flows from investors keen to access the firm’s strategies at a relatively low price, according to Bloomberg Intelligence. The three Dimensional ETFs -- all actively managed -- carry expense ratios ranging from just 0.12% to 0.35%. For context, the largest active ETF -- Cathie Wood’s $27 billion ARK Innovation ETF (ticker ARKK) -- charges 0.75%.

“It’s been proven over and over that if you serve up a brand-name manager at Vanguard-level fees, you will more than likely find an audience,” Bloomberg Intelligence analyst Eric Balchunas said.

Booth’s Dimensional Makes $700 Million Splash in ETF Debut

The Dimensional US Core Equity Market ETF (DFAU) has climbed 5.7% this year, besting the S&P 500’s 4.3% gain. The Dimensional International Markets Core ETF (ticker DFAI) and the Dimensional Emerging Core Equity Market ETF (ticker DFAE) have rallied 4.5% and 10.4%, respectively.

The strong start is a good omen for the Wall Street holdouts now entering the ETF industry, and for mutual fund managers who have seen investors fleeing to cheaper options. Dimensional falls into both camps: the Austin, Texas-based firm slashed fees by 15% on an asset-weighted basis on 33 of its equity mutual funds late last year amid a spate of outflows.

“DFA wields a big brand name and offers low-cost strategies that come with minimal career risk for advisers,” said Nate Geraci, president of the ETF Store, an advisory firm. “There is likely pent-up demand from advisers who aren’t part of DFA’s gated mutual fund distribution channel, along with from retail investors who couldn’t previously access the DFA lineup without an adviser.”

©2021 Bloomberg L.P.

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