Dimensional Fund Advisors has launched the Dimensional California Municipal Bond ETF (DFCA ) on the New York Stock Exchange. The fund seeks to provide current income expected to be exempt from federal and California state personal income taxes.
The actively managed DFCA invests primarily in a universe of investment-grade municipal securities. The interest on these securities is exempt from regular federal income tax and the state personal income tax of California.
DFCA may target, among other instruments, revenue bonds, general obligation bonds, industrial development bonds, municipal lease obligations, commercial paper, and variable rate demand obligations. Additionally, the securities may be issued by or on behalf of California or local governments and their agencies.
Under normal market conditions, DFCA will invest at least 80% of its net assets in municipal securities that pay interest exempt from California and federal personal income taxes. The fund doesn’t currently intend to invest in munis whose interest is subject to the federal alternative minimum tax.
A Growing Move Towards Muni Bond ETFs
“Advisors are increasingly turning to municipal bond ETFs,” said VettaFi’s head of research Todd Rosenbluth. “But most products are index-based and do not offer the potential benefits of active management.”
“We are encouraged by the strong adoption of our ETF suite, which has further solidified our place as the industry’s largest active ETF issuer,” said co-CEO Dave Butler. “In only 2½ years, the growth of our business has brought Dimensional’s suite to the verge of $100 billion in AUM.”
At Exchange 2023, Dimensional’s senior portfolio manager Joe Hohn spoke with NYSE’s Judy Shaw about investor outcomes and investment solutions.
“We are looking to build low-cost broadly diversified investment solutions with higher expected returns for our clients,” Hohn said. Dimensional is “taking the best of both worlds of passive and active management and marrying them together.”
DFCA carries a net expense ratio of 19 basis points.
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