Dimensional Short-Duration Fixed Inc ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports 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 A 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 style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. Dimensional Short-Duration Fixed Inc ETF earns an Above Average Process Pillar rating.    The predominant 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 underpins the rating. 

 Compared with other funds in the Short-Term Bond Morningstar Category, this fund has been consistently sensitive to interest-rate changes 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 average strategy in the category, 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 A rated bonds over the past few years. Compared with category peers, the strategy had more exposure to A rated bonds in the most recent month. Finally, during the past few years, the fund leaned meaningfully away from debt with 20- to 30-year maturities. In recent months, the strategy also had less exposure to debt with 20- to 30-year maturities compared to its peers.

 This strategy's 12-month yield is 4.2%, higher than its average peer's 3.7%. In addition, it has a 5.0% 30-day SEC yield (a measure similar to yield-to-maturity). Higher yields tend 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's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

Above Average

Process

Dimensional Short-Duration Fixed Inc 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, demonstrating underwhelming risk-adjusted performance. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 20 years of listed portfolio management experience. As a team, they manage six investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential 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

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