Dimensional Australia unveils active ETF offerings

Dimensional Australia has announced the launch of three new exchange-traded funds (ETFs) in what has been described as a very long-term strategic move for the firm Down Under. 

The three offerings, namely Australian Core Equity, Global Core Equity (Unhedged) and Global Core Equity (AUD Hedged), are among Dimensional’s most popular strategies that aim to provide broad exposure to the Australian and other developed equity markets, while emphasising the known drivers of higher expected return in small caps, value stocks and more profitable companies.

“When talking to clients, we talked about what they’d like to have in the ETF and the discussion was wide-ranging from fixed income to component strategies like global value, global small, even sustainability which have been attracting good flows recently,” CEO Bhanu Singh told Money Management.

“This [launch] is a very long-term strategic move by Dimensional Australia to bring these access points to the market. Aussie equities and global equities are at the core of the portfolios clients have with us, so the next steps will be, as we see more interest from clients in different areas, we’ll be bringing more down the line.”

The ETFs will be offered in a “dual-access” structure under which investors can access a fund through both ASX-listed and unlisted distribution channels. 

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It was the viability of the dual-access structure, alongside ASIC’s nod of approval to active ETFs following a 2019 review, that were among the drivers for the local offering, Singh noted.

“From our viewpoint, it was client demand, changes in the market where active ETFs became more prevalent, and the dual access model,” he said.

“We don’t have a view to say ETFs are better than unlisted trusts or vice versa, but our view is that for some people, it might make sense to use ETFs, and we want to be able to provide that flexibility to our clients to use what’s best for them.

“Our view is to meet our clients where they want to meet our investment strategies.”

Singh added that even as the appetite for active strategies grew, there remained fewer players with this offering, with around 80 per cent of ETFs in Australia still being passive. It highlighted a promising gap in the market for the firm, he noted.

Dimensional currently offers over 30 ETFs in the US market since its first launch in November 2020. It has since grown into the largest issuer of actively managed ETFs globally with approximately US$100 billion in assets. 

With this local launch, the firm drew on the expertise of its global counterparts, alongside service providers like Citigroup, Singh said.

“We have an extensive capital markets team in the US and we’ve hired a person here to play that role locally. They’ve been involved pretty heavily in launching ETFs locally,” he shared.

“Some of our partners in the operational side, like Citi, are also our partners in the US, so when we started working with them here, there was a lot of expertise we could leverage over.”

He added: “It takes a village to launch an ETF and a lot of villages from the US were employed [with this].”

Dimensional presently manages more than AU$900 billion for investors globally, including over $38 billion for clients in Australia and New Zealand. Its clients are financial intermediaries like advisers, brokers and super funds.