Dimensional International Value ETF DFIV should provide a long-term edge by applying modest factor tilts to the value side of the developed international stock market. Its broad diversification and style positioning earn it a Process Pillar rating upgrade to Above Average. 

The fund targets the cheapest third of mid- and large-cap stocks from overseas developed markets, pulling in around 500 names. The final list favors smaller and more profitable companies trading at low valuations. The managers do this by assigning a multiplier to each constituent that scales its market-cap weight. They assign larger multipliers, and thus more prominence, to smaller and more profitable companies trading at lower valuations. Profitability and valuation have historically been associated with market-beating returns. Therefore, these tilts should give this fund an edge when those styles are in favor.

This modified approach to market-cap weighting also keeps turnover in check, minimizing the associated trading costs and benefiting investors' bottom line. It harnesses the market's consensus opinion of each stock's relative value. Stocks that grow in size take up a larger share of the portfolio, while shrinking companies that may be struggling will have less importance. Overall, the portfolio’s turnover ratio consistently ranks among the best in the foreign large-value Morningstar Category.

The portfolio’s persistent value and small-cap orientations have buoyed performance, while an expansive portfolio mitigates the impact of a single stock on fund returns. The fund holds more than 500 stocks, with its 10 largest positions accounting for 19% of assets. Only two positions account for more than 2% of the portfolio: Shell (4.8%) and TotalEnergies (3.7%). Historically, it’s rare for a stock to claim more than 3% of the portfolio.

Low fees also contribute to strong category-relative performance. In the 10 years through October 2023, the mutual fund outpaced the average peer by a percentage point annually and the category benchmark MSCI ACWI ex USA Value Index by 1.5 percentage points annually. Volatility was higher than both, owing to its smaller-company focus, but risk-adjusted returns still looked favorable.

Analyst Rating

A considered approach to foreign value investing.

Analyst

Zachary Evens

TotalEnergies SE

SPDR Bloomberg Barclays Mortgage Backed Bond ETF

Banco Santander

Shell PLC

Cullen/Frost Bankers

MoneyLion

Suncor Energy

Teck Resources

Nutrien

The fund tends to be riskier than its peers, but its factor tilts should reward long-term investors who are willing to weather its volatile tendencies. It earns an upgrade to an Above Average Process Pillar rating.

Above Average

Process

DFA's multimanager team structure 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 the most cost-effective way possible. And spreading management responsibilities across several managers reduces the impact of personnel turnover when it does occur.

Jed Fogdall is the longest-tenured manager. He started at DFA as a portfolio manager in 2004 and has helped manage the exchange-traded fund since 2010 and the mutual fund since 2012. Fogdall heads DFA's global portfolio management team and chairs the firm's investment committee. Joseph Hohn also manages the ETF while Joel Schneider and Arun Keswani serve as managers on the ETF and mutual fund. Hohn joined the firm in 2012 and was added to the ETF roster in February 2022. Schneider has been with DFA for more than a decade and is the firm's deputy head of portfolio management in its Austin office. Keswani has been with DFA since 2011 and became a named portfolio manager on this fund in February 2020. 

This team executes strategies built by DFA's research department, which is helped by a number of prominent academics who serve as consultants. The team vets the latest research and pursues only strategies that it finds 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 International Value ETF

DFIV is an actively managed fund that provides exposure to large value stocks from developed markets while minimizing federal taxes on performance returns.

DFIV is an actively managed fund that provides exposure to stocks from developed markets, with an emphasis to large-caps, while minimizing federal taxes on performance returns.

Dimensional International Value ETF is an actively managed fund investing in companies with value characteristics outside the U.S. The portfolio is well-diversified across holdings, but quite heavy in Japanese companies and in financials. Not only valuation, but also growth metrics, dividend and performance look attractive.

DFIV: When Value, Growth And Yield Come Together

Listed in 2021, DFIV has an investment strategy focused on developed-world equities (outside the U.S.) with value characteristics. For an active strategy, DFIV has a reasonable expense ratio of just 27 bps. Its AUM of $6.1 billion is one of the largest in the sub class. The fund offers a mostly interesting value story with an overall strong performance since September 2021.

DFIV: Japan-Heavy Low-P/E Mix Worth Shortlisting

iShares MSCI EAFE Value ETF

iShares MSCI EAFE Value ETF holds about 500 stocks from developed markets except the U.S. and Canada. The top two countries are Japan and the U.K., and the portfolio is overweight in financials. DFIV, an actively managed international value fund, beats EFV in valuation, growth metrics, and performance.

EFV Vs. DFIV: Which Is The Best Ex-U.S. Value ETF?

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 Core Fixed Income ETF

Dimensional Emerging Markets Core Equity 2 ETF

Dimensional Emerging Markets Value ETF

Dimensional International Core Equity 2 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 International Value ETF is an actively managed fund picking value stocks in developed countries except the U.S. It is overweight in financials, but it is well diversified across countries and holdings. Valuation ratios, growth metrics, recent performance, expense ratio and turnover make it more attractive than its largest competitor.

DFIV: Attractive Valuation And Returns Relative To The Competition

Dimensional International Value ETF invests in targeted developed, mature economies with high sovereign bond ratings. A low turnover ratio also suggests continuity in its holdings. DFIV's stock selection has been impressive so far, and its emphasis on basic materials, industrial, financial and healthcare stocks is delivering results. Major investments of DFIV had a good past 12 months. DFIV, too, registered a double-digit price growth, and a total return quite close to that of the S&P 500.

DFIV: Decent Yield And Strong Price Growth For This Newly Listed Ex-U.S. ETF

Dimensional International Value ETF is an actively managed fund investing in value stocks outside the U.S. Almost 30% of DFIV assets are in financials.

DFIV: Well-Diversified, Actively Managed Ex-U.S. Value ETF

First Trust Limited Duration Investment Grade Corporate ETF

JPMorgan Ultra-Short Income ETF

This trend is poised to continue this year.

Actively Managed ETFs Claim Outsized Portion of 2023 Inflows

Avantis US Large Cap Value ETF

VictoryShares US EQ Income Enhanced Volatility Wtd ETF

WisdomTree U.S. High Dividend Fund

First Trust Morningstar Dividend Leaders Index Fund

Pacer Global Cash Cows Dividend ETF

iShares Core High Dividend ETF

JPMorgan U.S. Value Factor ETF

ALPS Sector Dividend Dogs ETF

U.S. equities posted their worst first half performance since 1970, as inflation concerns, Fed rate hikes, and slowing economic growth weighed on markets, according to S&P Dow Jones Indices. Dividend, value, and low volatility strategies outperformed, signaling the market's continuing emphasis on defense.

Here Are the 9 Most Popular Large-Cap Value ETFs

On this week's ETF Edge, host Bob Pisani spoke with VettaFi's financial futurist Dave Nadig and Gerard O'Reilly from Dimensional Fund Advisors about what long-term investors should be doing with the S&P 500 nearing bear market territory. As far as what history dictates and what O'Reilly is telling investors, “It's important to set expectations correctly, [.

ETF Edge: Dave Nadig on an Impending Bear Market

News for Dimensional International Value ETF ETF (DFIV)