A sound investment process and strong management team underpin Dimensional US Large Cap Vector ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the cheapest 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 momentum exposure and quality exposure compared with category peers. Momentum exposure is attributed to holding stocks currently on a winning streak and selling those that are on a downtrend. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The strategy’s management team earns an Above 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

Amazon

Microsoft

Exxon Mobil

Alphabet

JPMorgan Chase & Co

Broadcom

Johnson & Johnson

PepsiCo

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Dimensional US Large Cap Vector 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 beat their respective category's median Morningstar Risk-Adjusted Return for the period. The firm's five-year retention rate of 85% 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.

 This strategy leans toward larger, higher-growth companies compared with its average peer in the Large Value Morningstar Category. Looking at additional factor exposure, this strategy has consistently had exposure to high-momentum stocks compared with Morningstar Category peers over the past few years. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak. In recent months, the strategy was more exposed to the Momentum factor compared with its Morningstar Category peers as well. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in technology and communication services relative to the category average by 7.0 and 5.4 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and utilities, underweight the average by 9.4 and 4.6 percentage points of assets, respectively. The strategy owns 310 securities and is about as top-heavy as the category average, with 28.5% of assets in the top 10 holdings.

Above Average

Process

Dimensional US Large Cap Vector ETF earns an Above Average People Pillar rating. The team is backed by Jed S. Fogdall, the longest-tenured manager on the strategy, who provides over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.1 stars, indicating that their risk-adjusted returns have been in line with the category average. Jed S. Fogdall is supported by an experienced team, being able to draw on three additional listed managers, who average 24 years of listed portfolio management experience. As a team, they manage eight investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 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 US Large Cap Vector ETF

DFVX does not seek to track an index. The portfolio contains broad exposure to US large-cap stocks, actively selected based on fundamental criteria and managed for long-term capital appreciation.

Dimensional Fund Advisors has expanded its lineup of ETFs with the Dimensional US Large Cap Vector ETF (NYSE Arca: DFVX). The actively managed ETF invests in a broad and diverse group of readily marketable equity securities of large-cap U.S. companies.

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