Dimensional Fund Advisors (DFA), the largest sub-$100 billion ETF issuer according to VettaFi’s ETF Issuer League Table, has ridden 2019’s ETF rule and a series of mutual fund conversions to a successful run over the last few years. Speaking at the Exchange ETFs conference in Miami, DFA’s head of ETF capital markets Nicole Hunter and senior portfolio manager and vice president Joe Hohn discussed the firm’s long term view as well as the 2019 ETF rule and the benefits of consistency.
The firm currently offers 29 ETFs according to VettaFi’s ETF Database, with the largest being the Dimensional U.S. Core Equity 2 ETF (DFAC ). The value-focused duo of the Dimensional U.S. Targeted Value ETF (DFAT ) and the Dimensional U.S. Small Cap Value ETF (DFSV ) have been the strongest performers in the shop’s suite over the last month, meanwhile, returning 6.9% and 6.4% in that time, respectively.
That value orientation isn’t recent, though, in the form of a tactical adjustment from the firm’s well known active approach or a quickly drafted fund that launched to try to ride a wave of value success. Dimensional looks to offer investors a constituent, long term view.
“We like to have our advisors focus on the long term, right? These types of events happen, inflation rates going up. We don’t think that you can time any of that. The next thing we’re hearing is when are they going to call it, a recession has happened. You can’t look at that and actually use any of that information to help you out. We don’t think you can time markets,” Hohn said. “Look at your risk profile, look at what your goals are in terms of investing, and just stay focused on that.”
“To Joe’s point, if you look at our offerings that we currently have, you get the best of indexed and the best of active in a broad diversified portfolio,” Hunter added. “So you’re getting a very smart portfolio that’s not tied to the rigidity of indexing, but has that flexibility of active and ability to tilt towards higher expected returns, I think that sets you up for that long term view that Joe was talking about.”
That consistency of approach and its intent to think about investors from small advisors to large institutionals were just some of the attributes that attracted Hunter to DFA, she noted, having spent 15 years at behemoth ETF shop iShares from 2002 to 2017.
The 30th anniversary of the SPDR S&P 500 ETF (SPY) also came up in conversation with the DFA duo when asked to consider trends in the industry writ large. For Hohn, future ETF historians may look back on the current ETF boom with a similar amount of historical emphasis as received by SPY in recent weeks.
“You see a lot of the SPY 30 year birthday celebrations and all that, people touting all the new ideas and innovation that happened around that. I think you fast forward three years, you’re going to look back at the advent of the new ETF rule and look at all the innovation being pushed right now with active ETFs,” Hohn said.
“We are in a lane that didn’t exist before, and I think that that’s the innovation that Joe’s talking about,” Hunter said. “It’s that when you think about active, and this is one of the things I learned when I came to Dimensional, it’s really active and passive blended together. You don’t have to choose, you get both.”
Whether that long view prediction comes to pass, DFA is still continuing in its quest to join the $100 billion ETF AUM club, with its new lane of active strategies worth keeping an eye on to start the year.
For more coverage of the Exchange conference, please visit VettaFi | ETF Trends.
