Dimensional U.S. Core Equity 2 ETF (DFAC)DFAC

Dimensional U.S. Core Equity 2 ETF (DFAC)

Profile:

Dimensional U.S. Core Equity 2 ETF (DFAC) is a passively managed exchange-traded fund (ETF) that seeks to track the performance of the Dimensional US Core Equity 2 Index. This index comprises large- and mid-cap U.S. equities with a value tilt, meaning it prioritizes stocks with lower valuations compared to their peers. The ETF invests primarily in common stocks and uses a quantitative approach based on fundamental factors to select its holdings.

Objective:

DFAC's primary investment goal is to provide long-term capital appreciation through exposure to the U.S. equity market with a value bias.

Issuer:

Dimensional Fund Advisors (DFA) is the issuer of DFAC.

• Reputation and Reliability: DFA is a well-established investment management firm with a strong reputation for academic research and quantitative investing. The firm has been managing assets since 1981 and is known for its rigorous investment process and commitment to low costs.
• Management: DFA's investment team comprises experienced professionals with expertise in quantitative analysis and portfolio construction. The team is led by David Booth, the founder and chairman of Dimensional.

Market Share:

DFAC is considered a small-cap ETF within the large-cap value category, representing less than 1% of the total market share.

Total Net Assets:

As of October 26, 2023, DFAC has approximately $9.2 billion in total net assets.

Moat:

DFAC's competitive advantages include:

• Unique investment approach: DFA utilizes a quantitative approach based on fundamental factors that differs from traditional indexing methodologies.
• Low fees: DFAC's expense ratio is 0.19% which is significantly lower than actively managed funds in the same category.
• Experienced management team: DFA's management team has a long and successful track record in quantitative investing.

Financial Performance:

The historical performance of DFAC has been positive, outperforming its benchmark index, the Russell 1000 Value Index, over various timeframes.

• 1 year: 14.71% vs. 7.14%
• 3 years: 11.18% vs. 6.67%
• 5 years: 10.64% vs. 7.84%

Growth Trajectory:

DFAC's assets under management have steadily increased over the past several years, indicating investor demand for its unique investment approach.

Liquidity:

DFAC has average daily trading volume of over 250,000 shares, demonstrating decent liquidity. The bid-ask spread is also relatively tight, suggesting low transaction costs.

Market Dynamics:

Factors affecting DFAC include:

• Economic growth: A strong economy tends to benefit value stocks, as these companies are more sensitive to economic cycles.
• Interest rate changes: Rising interest rates can negatively impact value stocks.
• Market sentiment: Investor sentiment towards value investing plays a role in DFAC's performance.

Competitors:

Key competitors of DFAC include:

• iShares S&P 500 Value ETF (IVE)
• Vanguard Value ETF (VTV)
• Schwab U.S. Large-Cap Value ETF (SCHV)

Expense Ratio:

DFAC has an expense ratio of 0.19%, which is considered low compared to other actively managed value ETFs.

Investment approach and strategy:

• Strategy: DFAC tracks the Dimensional US Core Equity 2 Index, which focuses on large- and mid-cap U.S. equities with a value tilt.
• Composition: The ETF invests primarily in common stocks of approximately 600 companies across various sectors.

Key Points:

• Passively managed ETF tracking a value-oriented index.
• Low expense ratio of 0.19%.
• Experienced management team and a strong reputation for quantitative investing.
• Outperformed benchmark index over various timeframes.
• Decent liquidity.

Risks:

• Market risk: DFAC is subject to fluctuations in the overall stock market and may experience significant losses during market downturns.
• Value investing style risk: Value stocks can underperform growth stocks, especially during periods of strong economic growth.
• Tracking error risk: DFAC may not perfectly track its benchmark index due to factors such as trading costs and rebalancing activities.

Who Should Consider Investing:

DFAC is suitable for investors with a long-term investment horizon who:

• Believe in the value investing style.
• Seek exposure to the U.S. large- and mid-cap equity market with a