After launching its ETF business roughly two years ago, Dimensional Fund Advisors has grown to become “the largest active ETF issuer in the world,” according to ETF Investment Strategist Anthony Caruso.
Speaking with NYSE’s Judy Shaw at Exchange: An ETF Experience 2022, Caruso said that through the year, Dimensional was focused on expanding its ETF lineup to meet client demand. In the first quarter, Dimensional launched seven strategies. Since then, it’s brought eight more to the market (and plans to bring more).
In terms of his favorite ETFs within Dimensional’s lineup, Caruso noted that the firm recently launched the Dimensional US Small Cap Value ETF (NYSE Arca: DFSV), which takes the same approach to one of its flagship mutual fund strategies.
“When you think about our small-cap value portfolio on the mutual fund side, we have a 30-year track record of delivering over 100 basis points [of] outperformance versus the Russell 2000 Value,” he said before adding: “The reason we’re able to deliver that to clients is [by] having a daily focus on providing exposure to small-cap value and making that consistent over time,” Caruso added.
Rising Rates and Inflation
Caruso told Shaw that “the two main themes” he’s been hearing from investors and clients at the April conference were “rising rates and… inflation.” So, “the question for clients is, do you want to outpace, or do you want to hedge against, unexpected inflation?” Caruso asked rhetorically.
For clients who want to outpace inflation, Caruso recommended that they invest in global equities global fixed income markets. For clients who “want to hedge against unexpected inflation,” Dimensional launched the Dimensional Inflation-Protected Securities ETF (DFIP) in November.
“We’ve managed a similar portfolio on the mutual fund side for 15 years that has outperformed the Bloomberg TIPS Index by 10 basis points per year,” Caruso added.
Meanwhile, “on the rising rate side, for clients that don’t have as much sensitivity to interest rates,” Caruso pointed to the Dimensional Short-Duration Fixed Income ETF (NYSE Arca: DFSD), a strategy that has nearly $800 million in assets since launching in November.
“That’s for clients that don’t want as much sensitivity to interest rates, but want to have exposure to fixed income markets,” Caruso said about DFSD.
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