From the XY Investment Solutions Investment Committee:
Changes to “Core with DFA” Model - 8/12/2019
As you know, we do not intend to make frequent or extreme changes to models, but we do want to improve wherever possible, so we continually test what we are doing versus the universe of ever-changing options. During a recent review of our Core Non-US positions, we determined the following two changes were warranted:
- We will be removing VEU (Vanguard FTSE All-World ETF) from the Core with DFA model, replacing it with VEA (Vanguard FTSE Developed Markets ETF). The rationale here is two-fold:
- It will bring emerging markets exposure in the model in-line with our other models, and
- It will lower the overall cost of the portfolio, as VEA’s expense ratio is a little lower than VEU, at 5bps versus 9bps.
- Similarly, we will be removing DTMIX (DFA Tax-Managed International Value Portfolio) from the Tax-Sensitive version of the Core with DFA model, replacing it with VEA (Vanguard FTSE Developed Markets ETF).
- We determined that DTMIX was much more value-tilted than originally anticipated, as our preference is for a core developed markets holding in this position, and
- The cost advantage of switching is significant. DTMIX expense ratio is 53bps versus VEA’s of 5bps.
- VEA has historically been as tax-efficient as DTMIX and we have no reason to expect it will not be going forward.
Please contact Mario Nardone, Chief Investment Strategist, with any questions or concerns about these changes at firstname.lastname@example.org.