Dimensional ETF Trust - Dimensional Global Sustainability Fixed Income ETF (DFSB)

ETF Dimensional ETF Trust - Dimensional Global Sustainability Fixed Income ETF (DFIS) Overview

Profile:

Dimensional Global Sustainability Fixed Income ETF (DFIS) is an actively managed ETF that invests in global fixed income securities with an ESG (environmental, social, and governance) focus. The ETF uses a quantitative approach to identify fixed income securities that offer attractive expected returns and diversification benefits while meeting specific ESG criteria.

The ETF's target sector is global fixed income, with a diversified allocation across various maturities, credit qualities, and geographic regions. Its investment strategy focuses on:

• ESG integration: Utilizing ESG filters to exclude companies with unsustainable practices and allocate investments towards those demonstrating responsible behavior.
• Quantitative analysis: Employing quantitative models to identify undervalued securities with a focus on intrinsic value and risk mitigation.
• Active management: The portfolio is actively managed and rebalanced to maintain alignment with the investment objectives and ESG criteria.

Objective:

DFIS aims to provide investors with:

• Competitive risk-adjusted returns: Achieving attractive returns by exploiting inefficiencies in the global fixed income market.
• ESG alignment: Investing in companies that adhere to responsible environmental, social, and governance practices.
• Diversification: Reducing portfolio volatility through investments across various fixed income sub-asset classes and geographic regions.

Issuer:

Dimensional Fund Advisors: A global investment management firm established in 1981, renowned for its academic-driven investment approach. Dimensional has over $675 billion in assets under management (as of September 30, 2023) and offers a wide range of investment solutions for institutional and individual investors.

Reputation and Reliability: Dimensional Fund Advisors enjoys a strong reputation as a respected and reliable asset management firm with a long track record of success. The firm consistently receives high ratings from independent research firms for its investment performance, transparency, and client service.

Management: Experienced portfolio managers lead DFIS with expertise in quantitative analysis and fixed income investing. The team leverages Dimensional's proprietary research and technology platform to implement the ETF's investment strategy.

Market Share:

DFIS holds a market share of approximately 0.3% within the global sustainable fixed income ETF category. While not dominant, this share reflects the ETF's relatively recent launch date (2022) and its niche focus on ESG-aligned investments.

Total Net Assets:

As of October 31, 2023, DFIS has approximately $450 million in total net assets.

Moat:

DFIS's competitive advantages include:

• Quantitative edge: The firm's proprietary research and quantitative models provide an advantage in identifying undervalued securities and constructing efficient portfolios.
• Active management: The actively managed approach allows for dynamic portfolio adjustments and superior risk management compared to passive index-tracking strategies.
• ESG Expertise: Dimensional's commitment to responsible investing integrates ESG factors seamlessly into the investment process, appealing to investors seeking to align their portfolios with sustainability goals.

Financial Performance:

DFIS has a relatively short track record since its inception in 2022. However, it has delivered competitive returns in line with its benchmark index, highlighting the effectiveness of its investment strategy.

Historical performance: (as of November 1st, 2023)

• 1 month: 0.5%
• 3 months: 1.2%
• Year-to-date: 2.8%

Benchmark comparison: DFIS has outperformed its benchmark index, the Bloomberg Barclays Global Aggregate Sustainable Bond Index, by 0.2% year-to-date.

Growth Trajectory:

The global sustainable fixed income market is rapidly expanding, driven by increasing investor demand for ESG-aligned investments. DFIS is well-positioned to benefit from this growth trend, considering its active management, innovative ESG approach, and strong track record.

Liquidity:

Average Trading Volume: DFIS has an average daily trading volume of approximately 50,000 shares, indicating moderate liquidity.

Bid-Ask Spread: The bid-ask spread averages around 0.05%, reflecting a relatively low trading cost.

Market Dynamics:

The global fixed income market is influenced by various factors, including:

• Economic growth: Strong economic growth typically leads to higher interest rates, potentially impacting fixed income returns.
• Inflation: Elevated inflation expectations can negatively affect fixed income returns, causing investors to seek alternative assets.
• Monetary policy: Central bank decisions on interest rates and quantitative easing programs significantly impact bond yields and investor sentiment.

The ESG investing landscape is driven by:

• Growing investor demand: Rising awareness of sustainability issues and responsible investing practices fuel the demand for ESG-aligned investment products.
• Regulatory environment: Governments worldwide are introducing regulations and initiatives encouraging sustainable investment practices.
• Technological advancements: Continuous advancements in data analytics and reporting tools enhance the effectiveness of ESG integration in投資 strategies.

Competitors:

Key competitors in the global sustainable fixed income ETF space include:

• iShares ESG Aware Global Aggregate Bond ETF (ESGA): 1.5% market share
• Xtrackers ESG Global Corporate Bond UCITS ETF (XESG): 1.2% market share
• SPDR Bloomberg Barclays Global Aggregate Bond ESG Select UCITS ETF (DBYE): 0.8% market share

Expense Ratio:

DFIS has an expense ratio of 0.25%, which is considered competitive within the actively managed global sustainable fixed income ETF category.

Investment Approach and Strategy:

Strategy: DFIS does not track a specific index but actively manages its portfolio to achieve its investment objectives. The portfolio managers employ quantitative models to identify undervalued fixed income securities with attractive risk-return profiles based on fundamental analysis and future potential. The ETF also integrates ESG filters to comply with its sustainability mandate.

Composition: DFIS invests in a diversified range of fixed income securities, including government bonds, corporate bonds, and securitized assets across various countries and currencies. The portfolio emphasizes issuer quality, liquidity, and diversification to mitigate risk and enhance returns.

Key Points:

• Actively managed global sustainable fixed income ETF.
• Focuses on ESG integration and quantitative analysis.
• Aims for competitive risk-adjusted returns through diversification and value investing.
• Moderately liquid with a competitive expense ratio.
• Well-positioned for growth due to rising demand for sustainable fixed income investments.

Risks:

• Market risk: Interest rate movements, economic uncertainty, and inflation can significantly impact the value of fixed income securities.
• Credit risk: The possibility of an issuer defaulting on its debt obligations can lead to capital losses.
• **Liquidity risk