Dimensional files for five fixed-income ETF share classes

Dimensional Fund Advisors filed prospectus amendments this week to list five ETF share classes for fixed-income portfolios that do not currently have standalone ETFs.

The filings cover the Five-Year Global Fixed Income Portfolio (DFGB), the Intermediate Government Fixed Income Portfolio (DFGV), the Municipal Real Return Portfolio (DFMR), the Short-Duration Real Return Portfolio (DFSR) and the Short-Term Municipal Bond Portfolio (DFSM).

Under the plan, the ETF share classes would be offered alongside the existing mutual fund shares within Dimensional’s fund structures, using exemptive relief the firm received from the Securities and Exchange Commission last year that allows ETFs to operate as share classes of mutual funds.

Dimensional launched the first actively managed ETF share class earlier this year with the Dimensional US Micro Cap ETF (DFMC). The new filings extend that share-class approach into the firm’s fixed-income lineup.

The firm said the ETF share classes would retain the strategies’ systematic investment objectives while adding ETF features such as intraday trading and daily transparency. Dimensional also cited potential cost and tax advantages and possible back-office efficiencies for advisors and wealth managers.

Gerard O’Reilly, co-CEO and co-CIO, stated the firm is “committed to broadening access to ETF share classes and delivering the cost savings, economies of scale, and tax efficiency this structure can offer investors.”

Earlier this year the firm began consolidating certain U.S. equity mutual funds into unified ETF share class versions; the current filings would expand that dual-share class framework to include government, municipal and inflation-linked short-duration fixed-income portfolios.

If the SEC approves the prospectus amendments and the new share classes are listed on an exchange, investors and advisors will have additional ETF options for accessing Dimensional’s systematic fixed-income strategies while portfolio management would remain within the existing fund vehicles.