A top-rated global value ETF
This active ETF from Dimensional earns a Silver Medalist rating from our analysts.
Mentioned: DFA Australia Limited (DGVA)
Dimensional Global Value Trust DGVA is based on DFA's trademark multifactor methodology and remains a fine pick within value-oriented global equities. The adherence to a systematic process is backed by skilled management and optimized trade execution. We continue to have conviction in the fund's ability to deliver long-term outperformance.
the portfolio consists of large- and mid-cap stocks across 22 developed markets. The geographical allocations of the portfolio are similar to the MSCI World ex Australia Index, with around 70% in US-listed stocks. However, the sector exposures borne out of the distinctive methodology are quite different.
As of October 2024, the fund is overweight in energy, financial services, and basic materials and underweight in technology, consumer durables, and utilities. The value orientation of the fund has led to a fickle historical record with intermittent bursts of outperformance. In general, value-tilted strategies have faced difficult times over the past decade. However, with a fee of 0.46%, the fund remains a strong contender to generate alpha over the long term, provided the investor is at ease with the accompanying volatility.
Investment process
Leveraging the research of renowned academics such as Eugene Fama and Kenneth French, Dimensional aims to identify risk factors that are cost-effective to capture sources of excess returns. Value has been the mainstay factor, while profitability was introduced in early 2014. Dimensional doesn't pick stocks but rather takes a highly diversified systematic approach to exploit each factor.
Portfolio construction is driven by each stock's relative market cap and a range of weightings Dimensional has assigned for each market segment based on the stock's characteristics, such as price/ book ratio. This ensures an overweighting in value and high-profitability stocks while excluding growth and low-profitability stocks. As a stock exhibits low profitability or develops growth traits, Dimensional will gradually sell out of the positions. This is a key method of reducing trading costs.
The shop also considers momentum, delaying the purchase of downward momentum securities and delaying the disposal of securities with upward momentum that are eligible for sale. Individual stock positions are capped at 5% at the time of purchase. Property trusts are typically excluded from Dimensional's equity offerings as they do not have a high correlation to equities.
This portfolio is well-diversified, with 600-plus holdings across more than 20 countries. Portfolio construction begins with filtering out the smallest 10%-15% of companies in each country (measured by total market cap). The fund targets value by selecting only the cheapest 30% of companies, measured by price/book ratio. This tilts the fund to more mid-cap names compared with many peers, making it more volatile. Profitability is captured by tilting the portfolio toward high-profitability stocks (using an adjusted measure of operating income).
The value tilt has led to sector biases relative to the MSCI World ex Australia Index. For example, the fund typically is overweight in energy and underweight in technology. These biases get moderated to some degree owing to the profitability factor, yet they remain conspicuous. The profitability skew counters some of the fund's value orientation against the MSCI index, since highly profitable stocks tend to trade at higher valuations.
