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David Booth’s DFA Starts Clock on Landmark $26 Billion ETF Shift

DFA will turn four equity funds into ETFs “on or about” June 11.

(Bloomberg) -- Quant giant Dimensional Fund Advisors has laid out the timeline for converting nearly $26 billion worth of mutual funds into exchange-traded funds, a watershed moment for Wall Street money management.

The Austin, Texas-based firm will turn four equity funds into ETFs “on or about” June 11, according to a Wednesday filing with the U.S. Securities and Exchange Commission. That puts the $601 billion manager founded by David Booth on course to be only the second issuer to undertake a conversion, with the first-ever switch expected later this month.

Dimensional’s ETF lineup will more than double after the conversions, which will reduce management fees by between 20% and 56% compared to the existing mutual funds, according to the filing.

The pioneering quant firm has aggressively targeted the $5.8 trillion U.S. ETF market after first announcing plans to enter the industry last June. It has already launched a trio of actively managed equity products, which debuted in November and December and have amassed more than $840 million in assets.

“I would expect other funds to follow suit,” said Dave Nadig, the chief investment officer at data provider ETF Trends. It makes sense “for those narrow cases where you have mutual funds that aren’t spread out in defined contribution plans,” he said.

The conversions will affect the following funds:

  • The Tax-Managed U.S. Equity Portfolio becomes the Dimensional U.S. Equity ETF
  • The Tax-Managed U.S. Small Cap Portfolio becomes the Dimensional U.S. Small Cap ETF
  • The Tax-Managed U.S. Targeted Value Portfolio becomes the Dimensional U.S. Targeted Value ETF
  • The T.A. U.S. Core Equity 2 Portfolio becomes the Dimensional U.S. Core Equity 2 ETF

While Dimensional will miss becoming the first issuer to flip mutual funds to ETFs, its nearly $26 billion conversion will by far be the biggest. Guinness Atkinson Asset Management plans to convert about $30 million worth of mutual funds to ETFs on March 26. Vanguard Group has been moving some holdings to its lower-cost ETFs, though these are structured as a share class within the mutual fund business.

“We view this event as a reflection of our continued efforts to apply innovative thinking in pursuit of better investment outcomes for our investors,” Dimensional Co-Chief Executive Officers Dave Butler and Gerard O’Reilly wrote in the filing.

TAGS: Mutual Funds
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