Dimensional California Municipal Bd ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in A rated bonds and an overweight in debt with 10- to 15-year maturities compared with category peers. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. Dimensional California Municipal Bd ETF earns an Above Average Process Pillar rating.    The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 71%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The firm's five-year retention rate of 85% also underpins the process. Lastly, the process is limited by being an actively managed strategy. Historical data, like Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 Compared with other funds in the Muni California Intermediate Morningstar Category, this fund takes on lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been substantially underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, there's been an overallocation to debt with 10- to 15-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 10- to 15-year maturities in the most recent month. Finally, during the past few years, the fund leaned away from corporate debt. Nevertheless, the fund's corporate bonds exposure was in line with peers in the latest month.

  The portfolio holds assets with a higher average surveyed credit quality of AA, compared with the category average of BBB, and it holds no non-investment-grade assets, similar to its peers' average. Lower-credit-risk strategies are often able to navigate bear markets more effectively.

Above Average

Process

Dimensional California Municipal Bd ETF earns an Average People Pillar rating. David A. Plecha, the longest-tenured manager on the strategy, boasts over 25 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.8 stars, demonstrating disappointing risk-adjusted performance compared with category peers. David A. Plecha has an experienced backdrop of support. The three listed managers boast 22 years of average listed portfolio management experience. As a team, they manage 16 investment vehicles together, with an asset-weighted average Morningstar Medalist Rating of Neutral. This means, in aggregate, the team falls short and will struggle to produce positive alpha. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

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 California Municipal Bond ETF

DFCA is an actively managed fund that targets investment grade municipal securities that are exempt from federal and California state income tax. These securities have intermediate-term maturities in nature.

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Dimensional Fund Advisors has launched the Dimensional California Municipal Bond ETF (NYSE Arca: DFCA) on the New York Stock Exchange. The fund seeks to provide current income expected to be exempt from federal and California state personal income taxes.

News for Dimensional California Municipal Bond ETF ETF (DFCA)