US quantitative investing pioneer Dimensional Fund Advisors has listed two of its systematic active exchange traded funds (ETFs) in London.
The Dimensional Global Core Equity and Global Targeted Value Ucits ETFs will have sterling and dollar share classes on the London Stock Exchange and euro shares listed on Xetra in Germany.
Dimensional, which has amassed $226bn in its range of 40 mostly “passive” index-tracking ETFs, says its active ETFs are different in that they are not managed in reference to a benchmark and are designed to generate long-term outperformance rather than match the returns of stock market benchmark.
To do this they use evidence-backed “factors” to predict which stocks will do well rather than traditional “active” human stock pickers.
However, both funds list comparator indices, with the core equity fund (sterling ticker DPGC) running against the MSCI World index and charging a total of 0.26% a year.
The global value fund (sterling ticker DPGT) is seeking to best the MSCI World SMID Value index on an ongoing annual charge of 0.44%.
The core equity fund has exposure to 4,568 stocks with Nvidia, the $4.5tn AI chip maker, its biggest holding at 3.9%. Its top 10 also includes US technology giants Apple, Microsoft, Amazon, Meta and Alphabet alongside drug company Eli Lilly and Berkshire Hathaway, Warren Buffett’s holding company that last week disclosed a $4.3bn position in Google-owner Alphabet.
The global value fund is also highly diversified with 2,261 holdings led by Hartford Insurance Group at 0.6%, followed by similarly sized positions in Delta Airlines, Occidental Petroleum, gas producer EQT Corp and GE Healthcare Technology. The top holdings are all US companies.
Further active ETF listings are in the pipeline, says Dimensional, which was founded in 1981 on the efficient market hypothesis of Nobel-prize winning economist Professsor Eugene Fama, who sits on its investment committee.
Nathan Lacaze, co-CEO, Dimensional Fund Advisors, said: “These first two European listings provide a new opportunity for investors to experience Dimensional investing, with its Nobel Prize-winning insights and decades of expertise working to outperform benchmarks and peers.”
Our view
David Batchelor, senior fund analyst at QuotedData, welcomed the new launches. “It is always good to see a company that has had success in the much bigger US active ETF space dipping its toe into the European market. Dimensional has a particularly interesting offering, with strategies based on academic research, including the work of Nobel laureates. This results, at least for these first two products, in funds that hold thousands of individual stocks. This is clearly many times more holdings than a traditional actively managed investment or unit trust, and shows that the “active” in active ETFs covers a broad spectrum of investing styles. In this case capital is deployed in evidence backed “factors”, rather that on the whims of an individual manager. Such an approach means that the fees can be kept lower than is typical in active investing, at 0.26% and 0.44% respectively. We shall watch with interest at how successful the approach is at gathering assets”.
