Dimensional US Equity ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest 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

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Broadcom

Eli Lilly

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 US Equity ETF 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. The firm's five-year retention rate of 85% also buttresses the process. 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 tends to hold smaller, more growth-oriented companies than its average peer in the Large Blend Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. 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. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality factor exposure than 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 has allocations in its top two sectors, technology and consumer cyclical, that are similar to the category. The sectors with low exposure compared to category peers are real estate and healthcare; however, the allocations are similar to the category. The portfolio is positioned across 2,551 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 28.9% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category’s 49.5% average. And in closing, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

Above Average

Process

Dimensional US Equity ETF earns an Average People Pillar rating. Jed S. Fogdall, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 3.1 stars, demonstrating average risk-adjusted performance compared with category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of over 25 years of listed portfolio management experience. As a team, they manage five investment vehicles together, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 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 US Equity ETF

DFUS actively selects US equities of all sizes weighted by market capitalization in seeking to provide long-term capital appreciation.

SPDR S&P 500 ETF Trust

Dimensional U.S. Equity ETF has a long history, but may not outperform the SPY due to various reasons listed here. DFUS has a wide spread into small and mid-cap securities, but this hasn't made a significant difference in its performance compared to the SPY. The likelihood of a major rotation out of tech and into other sectors is low, making the SPY a better option for long-term capital appreciation and total return.

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DFUS is benchmarked against the Russell 3000 Index, which represents 96% of the US equity market. Dimensional U.S. Equity ETF (DFUS) has lower fees compared to popular iShares and Vanguard Russell 3000 ETFs.  Its CAGR is also better. For investor looking for one ETF to cover the entire US equity market, DFUS gets a Buy rating above its competitors.

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NEW YORK--(BUSINESS WIRE)--Citi has successfully supported the industry's largest mutual fund to ETF conversion for Dimensional Fund Advisors. The conversion includes four US tax-managed mutual funds into active transparent ETFs totaling $29bn in assets: Dimensional U.S. Equity ETF (NYSE: DFUS), Dimensional U.S. Small Cap ETF (NYSE: DFAS), Dimensional U.S. Targeted Value ETF (NYSE: DFAT) and Dimensional U.S. Core Equity 2 ETF (NYSE: DFAC). The ETFs listed on June 14, 2021. “Citi has been a long

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News for Dimensional US Equity ETF ETF (DFUS)