Dimensional Emerging Mrkts Sstby Cr 1ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Stewart Information Services

Celestica

Sotheby's

Cushing Energy Income Fund of Benef Interest

Apeiron Capital Investment Corp

Fisker

Natural Resource Partners

Molina Healthcare

Credicorp

AngloGold Ashanti

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Dimensional Emerging Mrkts Sstby Cr 1ETF earns an Above Average Process Pillar rating. 

The largest contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 71%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Respectable risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy leans toward smaller, more value-oriented companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. Different from its historical appetite, however, the Liquidity factor was in line with the Morningstar Category average in recent months. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. Such exposure tends to pay off when markets are hot and to be costly when they are not. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum approaches bet that rising stocks will continue to rise and that lagging stocks will continue to lag. In this month, the strategy also had more exposure to the Momentum factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials by 4.9 percentage points in terms of assets compared with the category average, and its healthcare allocation is similar to the category. The sectors with low exposure compared to category peers are energy and financial services, underweight the average by 3.3 and 3.2 percentage points of assets, respectively. The portfolio is positioned across 4,091 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 14.2% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 25.4% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 22% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

Dimensional Emerging Mrkts Sstby Cr 1ETF earns an Average People Pillar rating. Jed S. Fogdall’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. The average Morningstar Rating of the strategies they currently manage is 3.1 stars, reflecting average risk-adjusted performance versus category peers. Jed S. Fogdall is supported by an experienced team, being able to draw on four additional listed managers, who average 20 years of listed portfolio management experience. As a team, they manage four investment vehicles together, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Dimensional’s mutual fund business has faced some tough challenges over the past few years. Despite large and persistent outflows, the firm has remained steadfast in its philosophy and responded in a way that benefits clients while improving its competitiveness. Dimensional maintains its High Parent Pillar rating.

More than $80 billion left Dimensional’s mutual funds between 2020 and 2022, but its response to the turmoil has been admirable. The firm started reducing fees in early 2020, and it continued the effort with three additional rounds of cuts.

Dimensional’s endeavor into exchange-traded funds was the biggest step it took to shore up its business. The firm converted seven tax-managed mutual funds to ETFs between mid-2021 and mid-2022. Along the way, it launched an additional two dozen that largely follow the same strategies underpinning the existing mutual funds. The firm also reinvested in its separate accounts platform by bolstering the technology used to manage these portfolios. The effort was aimed at improving operational efficiencies.

These measures appear to be paying off. The firm’s new ETFs have proved popular among its clients. In 2022, they brought in enough new money to nearly offset the outflows from its mutual funds. The separate account platform’s operational improvements, along with the new ETF lineup’s tax efficiency, should benefit clients and strengthen the firm’s prospects.

High

Parent

Dimensional Emerging Markets Sustainability Core 1 ETF

DFSE is an actively managed ETF that aims to invest in a portfolio of emerging market equities across all market-caps with perceived high profitability and positive sustainability characteristics.

Dimensional International Sustainability Core 1 ETF

Dimensional US Sustainability Core 1 ETF

Dimensional Fund Advisors on Wednesday listed three new equity sustainability exchange traded funds on the New York Stock Exchange. The new ETFs offer broadly diversified exposure to U.S., developed international, and emerging markets equities while applying climate-focused sustainability considerations.

News for Dimensional Emerging Markets Sustainability Core 1 ETF ETF (DFSE)