Dimensional Fund Advisors (DFA) has launched a set of exchange-traded funds in Australia just three years after listing products for the first time in the US.
DFA kicked off its ASX-listed ETF campaign with two core global equity funds (hedged and unhedged versions) and an Australian equities strategy.
In a release, the manager says the three funds are “among the firm’s most popular”, following the smart beta-style of investing in broad market indices but tilted to “the known drivers of higher expected return in small caps, value stocks and more profitable companies”.
Bhanu Singh, DFA Australia chief, said in the statement: “By launching ETFs, we are expanding [investor] choices in how they access our investment expertise on behalf of their clients.”
Management fees for the new ETFs range from 0.28 per cent for the Australian equities fund to 0.36 per cent for both the global shares products.
DFA claims to be the largest actively managed ETF provider in the US after funds under management surged from zero to US$100 billion since the firm entered the market in 2020.
A US regulatory change in 2020 opened the way for actively managed listed funds in a market that has historically been dominated by pure index plays. ETFs are also tax-advantaged in the US compared to unlisted managed funds due to the relative structural differences in how capital gains are distributed to investors.
For example, a 2022 Morningstar study found ETFs passed on capital gains to investors far less frequently and in smaller amounts even compared to unlisted index funds.
“It’s no surprise that investors have been parking more of their taxable money in ETFs and that asset managers are flocking to such vehicles in droves,” the Morningstar report says. “ETFs’ tax advantage over mutual funds is clear.”
The tax situation is more complex for NZ investors who access offshore-listed ETFs where generally the foreign investment fund rules apply. Nonetheless, many local investors do buy ETFs listed on the ASX and other exchanges.
DFA, meanwhile, has also opened up a few unlisted portfolio investment entity (PIE) funds – most recently an Australian equities strategy – to offer tax-efficient options for NZ investors.
The US-headquartered manager last reported about A$900 billion globally including A$38 billion from Australasian clients (of which perhaps $6 billion or so comes from NZ).
In other changes to its Australia-domiciled wholesale trusts revealed last week, DFA says it has removed “the condition that investors first receive advice on any proposed investment from a Participating Adviser”.