Dimensional National Municipal Bond ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy merits an Average Process 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 seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. Dimensional National Municipal Bond ETF earns an Average Process Pillar rating.    The largest 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The firm's five-year retention rate of 88% also supports the process. Lastly, the process is limited by the fund's unimpressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

 Compared with other funds in the Muni National Short Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity 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 debt exposure was in line with peers in the latest month.

 This strategy's 12-month yield is 2.3%, lower than its average peers' 2.5%. It also has a 2.9% 30-day SEC yield (a measure similar to yield-to-maturity). A lower yield tends to indicate lower credit risk. The portfolio has a higher average surveyed credit quality of AA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies that take on less credit risk can often shoulder more-adverse market conditions.

Average

Process

Dimensional National Municipal Bond ETF earns an Average People Pillar rating. David A. Plecha’s veteran status, with over 25 years of listed portfolio management experience, brings a wealth of experience to the table. 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 21 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.

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 National Municipal Bond ETF

DFNM is an actively managed ETF that provides exposure to intermediate-term, investment-grade municipal bonds that are exempt from federal income tax.

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News for Dimensional National Municipal Bond ETF ETF (DFNM)