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Dimensional files application for ETF share class exemptive relief


US-based Dimensional Fund Advisors has filed an application for exemptive relief with the Securities and Exchange Commission (SEC) seeking permission to offer ETF share classes of its US mutual funds, which represent approximately USD400 billion in investor assets.

In the filing, Dimensional outlines how it believes this structure could benefit mutual fund class and ETF class shareholders. The firm writes that mutual fund class shareholders could benefit through lower transaction costs and greater tax efficiency, while new ETF class shareholders could also benefit from advantages offered by this structure, including more efficient rebalancing using mutual fund cash flows and lower total portfolio transaction costs, among other benefits of scale passed along to investors.

“Many advisors and institutions continue to ask for new investment strategies to be efficiently delivered as both mutual funds and ETFs,” says Gerard O’Reilly, Co-CEO and Chief Investment Officer. “We believe access to systematic active solutions through new ETF share classes can provide additional cost efficiencies and tax management benefits while targeting higher expected returns for both mutual fund and ETF investors. We look forward to further engaging with the SEC to better address this need.”

Dimensional primarily serves investors that access Dimensional funds through financial advisors, intermediaries, and institutions. The firm began offering low-cost systematic strategies to institutions in 1981 and was an early supporter of industry shifts towards more investor-centric fiduciary and independent advice, it says. Today, the firm serves an extensive network of financial intermediaries and institutions that represent hundreds of thousands of investors and households across the US.

 “An ETF share class would allow advisors and institutions more choice in tailoring portfolios to better address investors’ individual needs,” says Dave Butler, Co-Chief Executive Officer. “Dimensional is committed to further advancing industry innovation on behalf of the financial professionals we serve and providing more ways to access low-cost, thoughtfully constructed investment solutions.”

In the latest issue of the ETF Express podcast series, Off the Record, supported by TrussEdge, our panel discussed the arrival of ETFs as a share class. Listen here.

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