Dimensional Fund Advisors, the industry's largest active ETF issuer, filed an application with the Securities and Exchange Commission seeking exemptive relief that would allow it to offer ETF share classes of its U.S. mutual funds.
Those mutual funds represent about $400 billion in investor assets, Dimensional said in a news release Thursday. Dimensional currently offers 31 ETFs, all of which are active transparent ETFs, with assets under management totaling about $95 billion, a Dimensional spokesman said.
In its application, Dimensional said it believes the ability of a fund to offer both mutual fund shares and ETF shares could be beneficial to the fund and to shareholders of each type of class.
"In recent years, Financial Intermediaries and their clients have reported a greater interest in ETFs, particularly as the Financial Intermediaries' clients hold more ETFs in their accounts and as ETF model portfolios grow in popularity," the filing said.
The multi-class structure "will allow investors to choose the manner in which they wish to hold interests in a Fund based on the share class characteristics that are most important to the investor," the filing added.
Dimensional has quickly climbed the ETF leader board through conversions of mutual funds and the successful launch of low-cost active ETFs, said Todd Rosenbluth, head of research at VettaFi, a data and analytics provider. "But the ability to (add) an ETF share class to their broader suite will make them an even larger player."
Dimensional's application comes after a patent held by Vanguard Group that "basically gave them a monopoly over the ETF as a mutual fund share class structure," expired in May, Ben Johnson, head of client solutions, asset management, at Morningstar, said in an interview Thursday.
"Dimensional, like so many of its peers, has come to terms with the fact that ETFs are a more efficient way of delivering their investment strategies to their clients and for many of their clients have become the format of choice," Mr. Johnson said.
As of March 31, Dimensional's assets under management totaled $614 billion, the Dimensional spokesman said.
