Dimensional Fund Advisors, the leading active ETF issuer in the industry, has submitted an application to the Securities and Exchange Commission (SEC) seeking regulatory relief. This exemption would enable the company to introduce ETF share classes for its U.S. mutual funds.
According to a recent press release by Dimensional, these mutual funds hold approximately $400 billion in investor assets. As of now, Dimensional offers 31 active transparent ETFs, managing a total of about $95 billion in assets under management, as confirmed by a spokesperson from Dimensional.
The company’s application emphasizes the potential advantages of providing both mutual fund shares and ETF shares within a single fund. Dimensional believes that this approach could benefit the fund itself as well as shareholders invested in each class.
The filing states, “In recent years, Financial Intermediaries and their clients have reported a greater interest in ETFs, particularly as the Financial Intermediaries’ clients hold more ETFs in their accounts and as ETF model portfolios grow in popularity.”
As per the filing, the implementation of a multi-class structure will grant investors the flexibility to select their preferred method of holding interests in a Fund, based on the specific characteristics associated with each share class.
ETF Market Presence Following Vanguard’s Patent Expiration
According to Todd Rosenbluth, Head of Research at VettaFi, a data and analytics provider, Dimensional has rapidly gained prominence in the ETF market by converting mutual funds and successfully introducing low-cost active ETFs. Rosenbluth noted that the addition of an ETF share class to their existing range of offerings will further elevate Dimensional’s position as a significant player in the industry.
This move by Dimensional follows the expiration of a patent held by Vanguard Group, which previously granted them a near-exclusive right to the ETF as a mutual fund share class structure. Ben Johnson, Head of Client Solutions, Asset Management, at Morningstar, mentioned in an interview that this patent expiration occurred in May.
According to Mr. Johnson, Dimensional, like many other similar firms, has recognized the efficiency of ETFs as a means of providing investment strategies to clients. ETFs have increasingly become the preferred format for numerous clients.
As of March 31, Dimensional’s total assets under management amounted to $614 billion, as confirmed by a spokesperson from the company.
Conclusion
Dimensional Fund Advisors has applied for regulatory relief from the SEC to introduce ETF share classes for its U.S. mutual funds. This strategic move aims to cater to investors’ preferences and capitalize on the increasing popularity of ETFs. By offering both mutual fund shares and ETF shares within a single fund, Dimensional seeks to provide flexibility and enhance the overall investor experience.
