DFA U.S. Targeted Value Portfolio follows a time-tested process focused on the small-value segment of the U.S. market. Its broad portfolio, cost-effective execution, and competitive fee should give it a long-term advantage.

This strategy focuses on stocks from the cheaper half of the U.S. mid- and small-cap markets in a cost-effective way. It avoids holding companies with poor profitability, which should steer the portfolio away from the riskiest names in its selection universe, and it weights constituents by their market cap. This low-turnover approach captures the market’s collective opinion of each stock’s value while cutting back on trading costs.

Dimensional’s traders build on that cost-effective approach. They select trades from an eligible pool provided by the fund’s portfolio managers. Traders can substitute a given stock for another with similar size and value characteristics, and they can trade patiently to further curb transaction costs.
The portfolio lands among the broadest and most diversified in the small-value Morningstar Category. It holds more than 1,300 stocks, while its 10 largest positions represent about 6% of assets. The fund’s price/book ratio has been similar to the Russell 2000 Value Index. But including mid-cap stocks and tilting toward profitable firms means the portfolio’s average market cap and profitability have been higher than the index's.

Dimensional converted a tax-managed mutual fund version of this strategy to an exchange-traded fund in mid-2021. The remaining mutual fund and ETF follow the same underlying strategy, but they may have small differences in their average characteristics owing to differences in trading and execution. They should provide a similar risk/reward profile over the long run.

Collectively, these characteristics have provided a long-term benefit. The mutual fund beat the Russell 2000 Value Index by almost 1.8 percentage points per year over the 10 years through December 2023. Keeping a lid on trading costs contributed to its outperformance.

Analyst Rating

A broad and cost-effective small-value strategy.

Senior Analyst

Daniel Sotiroff

Toll Brothers

HF Sinclair Corp

Arrow Electronics

PBF Energy

Cleveland-Cliffs

SYNNEX

Ally Financial

Unum

United States Steel

AGCO

This fund strikes a balance between active and passive approaches to portfolio management. A time-tested approach, broad portfolio, market-cap-weighted construction, and Dimensional’s flexible trading support an Above Average Process rating.

Above Average

Process

Dimensional’s multimanager team and strong supporting infrastructure support an Above Average People Pillar rating. The three named managers on this fund collaborate with the firm’s trading desks to execute this strategy in a cost-effective way. Spreading management responsibilities across several managers reduces the impact of personnel turnover when it does occur.

Jed Fogdall is the longest-tenured manager on this fund. He started at Dimensional as a portfolio manager in 2004 and has helped manage this fund since February 2012. Fogdall heads Dimensional’s global portfolio management team and chairs the firm’s investment committee.

Joel Schneider and Marc Leblond also serve as managers on this fund. Schneider has been with Dimensional for about a decade and is the firm’s deputy head of portfolio management for its Austin office. Leblond is a relative newcomer. He has been with the firm since 2015 and became a named portfolio manager on this fund in February 2020.

This team executes strategies built by Dimensional’s research department, which is helped by a number of prominent academics who serve as consultants. They vet the latest research and pursue only strategies that they find sensible, robust, persistent, and cost-effective.

People

Dimensional’s mutual fund business has faced some tough challenges over the past few years. Despite large and persistent outflows, the firm has remained steadfast in its philosophy and responded in a way that benefits clients while improving its competitiveness. Dimensional maintains its High Parent Pillar rating.

More than $80 billion left Dimensional’s mutual funds between 2020 and 2022, but its response to the turmoil has been admirable. The firm started reducing fees in early 2020, and it continued the effort with three additional rounds of cuts.

Dimensional’s endeavor into exchange-traded funds was the biggest step it took to shore up its business. The firm converted seven tax-managed mutual funds to ETFs between mid-2021 and mid-2022. Along the way, it launched an additional two dozen that largely follow the same strategies underpinning the existing mutual funds. The firm also reinvested in its separate accounts platform by bolstering the technology used to manage these portfolios. The effort was aimed at improving operational efficiencies.

These measures appear to be paying off. The firm’s new ETFs have proved popular among its clients. In 2022, they brought in enough new money to nearly offset the outflows from its mutual funds. The separate account platform’s operational improvements, along with the new ETF lineup’s tax efficiency, should benefit clients and strengthen the firm’s prospects.

High

Parent

Dimensional US Targeted Value ETF

DFAT is an active, tax-managed fund that seeks to provide long-term capital appreciation from a portfolio of US mid- and small-cap value stocks.

Dimensional U.S. Targeted Value ETF is an actively managed fund that focuses on small-cap companies with value characteristics. DFAT has a solid $8.7 billion in assets and a healthy average daily volume, making it suitable for long-term investment and trading strategies. DFAT has outperformed its benchmark, the Russell 2000 Value Index, and its competitors in the last 12 months, showing strong performance relative to peers.

DFAT: Best Of Breed Small Cap Fund

ARK Innovation ETF

Avantis U.S. Small Cap Value ETF

Dimensional US Core Equity 2 ETF

First Trust Preferred Securities & Income ETF

First Trust Enhanced Short Maturity ETF

BlackRock Ultra Short-Term Bond ETF

JPMorgan Equity Premium Income ETF

JPMorgan Ultra-Short Income ETF

PIMCO Enhanced Short Maturity Active ETF

ETFs started out as just another form of index-matching alternative to mutual funds. But today, there are now over 1000 actively managed ETFs.

Consider These Market-Beating ETFs Now

Dimensional U.S. Targeted Value ETF is an actively managed fund focused on small cap value stocks. It is heavy in financials, while almost ignoring real estate and utilities.

DFAT: Actively Managed Value Fund, Recently Outperforming

Dimensional US Small Cap Value ETF

Dimensional Fund Advisors (DFA), the largest sub-$100 billion ETF issuer according to VettaFi's ETF Issuer League Table, has ridden 2019's ETF rule and a series of mutual fund conversions to a successful run over the last few years.

DFA Execs Tout Long Term View, New Active Lane

VictoryShares US EQ Income Enhanced Volatility Wtd ETF

Pacer US Cash Cows 100 ETF

VictoryShares US Small Cap High Div Volatility Wtd ETF

Invesco Zacks Mid-Cap ETF

WisdomTree U.S. SmallCap Dividend Fund

iShares Core Dividend Growth ETF

WisdomTree US Smallcap Quality Dividend Growth Fund

WisdomTree US Quality Dividend Growth Fund

WisdomTree U.S. High Dividend Fund

SPDR Dow Jones Industrial Average ETF

Global X SuperDividend US ETF

TrueShares Low Volatility Equity Income ETF

WisdomTree U.S. LargeCap Dividend Fund

WisdomTree U.S. MidCap Dividend Fund

WisdomTree U.S. Total Dividend Fund

ALPS Equal Sector Weight ETF

Invesco S&P 500 Equal Weight Communication Services ETF

Fidelity Blue Chip Growth ETF

American Century Focused Dynamic Growth ETF

First Trust Morningstar Dividend Leaders Index Fund

Fidelity MSCI Energy Index ETF

First Trust Consumer Discretionary AlphaDEX Fund

First Trust Technology AlphaDEX Fund

This article summarizes the performance of the entire U.S. equity market by examining 1Y, 3Y, 5Y, and 10Y returns for 850+ ETFs across 40 categories. Major indices declined, but investing in Energy, High-Dividend, and Large-Cap Value ETFs softened the blow. Meanwhile, searching for the bottom in mega-cap growth and thematic ETFs didn't work.

U.S. Equity ETFs: The Best And Worst Of 2022

PIMCO Active Bond ETF

Dimensional US Marketwide Value ETF

SPDR S&P 500 ETF Trust

While actively managed ETFs are all the rage, passive funds still dominate total assets.

Top 10 Active ETFs of 2022

Dimensional US Small Cap ETF

Dimensional US Equity ETF

Indexing has its benefits, including broad diversification, greater transparency, and lower costs. However, trying to closely track a commercial index also creates constraints that can limit your return potential.

Put Financial Science to Work for Your Clients

Grayscale Ethereum Trust

Grayscale Bitcoin Trust

 SPDR Blackstone Senior Loan ETF

After being ignored for years, actively managed ETFs are experiencing a renewed interest from investors. A report from Morningstar shows that after active funds of all stripes experienced net outflows from 2015 to 2020, active ETFs saw $87 billion in inflows in 2021, with the total amount of money in active ETFs growing by 44% [.

Morningstar: Active ETFs See Surge in Flows, AUM

Retail investors can now access systematic exchange traded fund solutions backed by Dimensional Fund Advisors' time-tested investment approach. In the recent webcast, Why Systematic Active Over Either Active or Passive, Gerard O'Reilly, co-CEO and CIO of Dimensional Fund Advisors, explained that Dimension's ETF strategies are broadly diversified, have low turnover, and are transparent.

A Systematic Approach Could Help ETF Investors More Efficiently Access the Markets

SmartETFs Asia Pacific Dividend Builder ETF

SmartETFs Dividend Builder ETF

The four funds represent almost $10 billion in assets under management.

JP Morgan To Convert 4 Mutual Funds

Dimensional International Core Equity Market ETF

Dimensional US Core Equity Market ETF 

We discuss DFA's ETF conversions and midyear outlook

Dimensional's Mutual Fund to ETF Conversion, Midyear Outlook & More

Dimensional's Mutual Fund to ETF Conversion, Midyear Outlook and More

The active manager's mutual-fund-to-ETF conversion can serve as a blueprint to other would-be ETF issuers.

Dimensional Provides ETF Conversion Map

NEW YORK--(BUSINESS WIRE)--Citi has successfully supported the industry's largest mutual fund to ETF conversion for Dimensional Fund Advisors. The conversion includes four US tax-managed mutual funds into active transparent ETFs totaling $29bn in assets: Dimensional U.S. Equity ETF (NYSE: DFUS), Dimensional U.S. Small Cap ETF (NYSE: DFAS), Dimensional U.S. Targeted Value ETF (NYSE: DFAT) and Dimensional U.S. Core Equity 2 ETF (NYSE: DFAC). The ETFs listed on June 14, 2021. “Citi has been a long

Citi Supports the Industry's Largest Mutual Fund to ETF Conversion

The exchange-traded fund format should bolster Dimensional's tax-efficient strategy for some of its mutual funds, the firm's co-CEO says.

Dimensional just converted $30 billion worth of mutual funds to ETFs. What it could mean for the industry

News for Dimensional US Targeted Value ETF ETF (DFAT)