Dimensional Core Fixed Income 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 least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in corporate bonds and BBB rated bonds 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 evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Dimensional Core Fixed Income ETF earns an Above Average Process Pillar rating.    The most notable contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 67%. 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 88% also strengthens 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 Intermediate Core Bond Morningstar Category, this fund takes on significantly 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. Relative to the category average, the managers have been significantly overweight corporate bonds in recent years. In the latest month, the strategy has relatively overweighted corporate bonds compared with its peers as well. Additionally, there's been a notable overweight bias towards BBB rated bonds over the past few years. Compared with category peers, the strategy had more exposure to BBB rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully towards debt with 15- to 20-year maturities. In this month, the strategy also leaned more towards debt with 15- to 20-year maturities compared with its peers.

 This strategy has a 4.5% 12-month yield, higher than its average peer's 3.6%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.8%. While a higher yield may deliver more income, it also tends to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio holds assets with a higher average surveyed credit quality of AAA, compared with the typical peers' A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Above Average

Process

Dimensional Core Fixed Income ETF earns an Average People Pillar rating. David A. Plecha, the longest-tenured manager on the strategy, provides strong guidance, offering over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.7 stars, indicating that their risk-adjusted returns have been in line with the category average. David A. Plecha has an experienced backdrop of support. The three listed managers boast 20 years of average listed portfolio management experience. As a team, they manage nine investment vehicles together, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha in aggregate. 

 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 Core Fixed Income ETF

DFCF seeks income and capital appreciation from a broad, actively managed portfolio of global investment-grade fixed income securities.

The Dimensional Core Fixed Income ETF offers exposure to long-duration bonds and fixed-income securities to maximize total return for investors. The current yield curve is inverted, with short-term bond yields higher than longer-duration bonds, making investing in long-duration bonds less favorable. The fund's strategy of allocating funds to shorter-term securities and corporate bonds with higher credit exposure has helped it outperform the benchmark in the current yield curve environment.

DFCF: Risky Bet In A 'Higher For Longer' Interest Rate Environment

Avantis International Small Cap Value ETF

Avantis Emerging Markets Equity ETF

Avantis US Equity ETF

Avantis U.S. Small Cap Value ETF

Vanguard Total Bond Market ETF

Capital Group Dividend Value ETF

Capital Group Growth ETF

Dimensional US Core Equity 2 ETF

Dimensional International Core Equity Market ETF

Dimensional Emerging Markets Core Equity 2 ETF

Dimensional Emerging Markets Value ETF

Dimensional International Core Equity 2 ETF

Dimensional International Value ETF

Dimensional US Equity ETF

Dimensional US High Profitability ETF

iShares MSCI Emerging Markets ETF

Fidelity Total Bond ETF

First Trust TCW Opportunistic Fixed Income ETF

Janus Henderson AAA CLO ETF

JPMorgan Equity Premium Income ETF

JPMorgan Nasdaq Equity Premium Income ETF

Janus Henderson Mortgage-Backed Securities ETF

Putnam ESG Core Bond ETF

PGIM Ultra Short Bond ETF

And, plenty of ink has been spilled about how much money has gone into active ETFs in 2023, and from a pure top-line flows perspective, it's true. A significant chunk of the $289 billion that has entered U.S.-listed ETFs year to date went into active products — 22%, in fact.

2023's Overactive Active ETF Flows Are Mostly a Mirage

Dimensional Inflation-Protected Securities ETF

Dimensional National Municipal Bond ETF

Dimensional Short-Duration Fixed Income ETF

After decades of riding on a falling rate environment, fixed-income investors have faced a challenging year with elevated inflation weighing on real yields and hawkish Federal Reserve monetary policies adding to interest rate risks. Nevertheless, there are alternative bond strategies that could still help investors diversify risk and maintain reliable income generation.

Dimensional Presents Bond Strategies Built for Volatility

Dimensional Global Sustainability Fixed Income ETF

Investors can turn to innovative systematic bond exchange traded fund strategies, like those practiced by Dimensional, to help navigate today's fixed-income market environment.

Bond ETF Strategies to Help Enhance Your Core Fixed-Income Portfolio

Pacer US Cash Cows 100 ETF

Nasdaq F&B Shs Nasdaq Food & Beverage

iShares Core S&P 500 ETF

AXS Astoria Inflation Sensitive ETF

iShares Treasury Floating Rate Bond ETF

Vanguard S&P 500 ETF

Teucrium Wheat Fund

These ETFs bucked the downtrend in the markets, managing to still grow their assets under management.

Fastest Growing ETFs Of The Year

For this episode of ETF 360, ETF Trends' CEO Tom Lydon speaks with Dave Plecha, global head of fixed income at Dimensional Fund Advisors, to discuss current advisor sentiment around inflation and portfolio strategies. Plecha reiterates that inflation is heavy on advisors' minds, but he believes that where we currently are within the interest cycle [.

ETF 360: Q&A With Dimensional Fund Advisors' Dave Plecha

On Tuesday, Dimensional Fund Advisors, a global leader in systematic investing, listed the company's first four active transparent fixed income exchange-traded funds (ETFs) and filed a preliminary registration statement for 10 more equity ETFs. Dimensional launched one of the industry's first systematic bond funds in 1983.

!Dimensional Lists Four Fixed Income ETFs and Announces Further Expansion of ETF Offering

AUSTIN, Texas--(BUSINESS WIRE)--Dimensional Fund Advisors listed today four active transparent fixed income ETFs and filed a preliminary registration statement for 10 equity ETFs.

News for Dimensional Core Fixed Income ETF ETF (DFCF)