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Dimensional Fund Advisors is officially joining the ETF-share-class fray, becoming the first asset manager in over 20 years to win U.S. regulatory approval to launch ETF share classes on existing mutual funds. The U.S. Securities and Exchange Commission (SEC) signed off on the long-awaited request late Monday, removing the final obstacle in DFA’s effort to replicate a structure long dominated solely by Vanguard, according to a Reuters report.
The approval includes 13 DFA mutual funds, but sources close to the matter say the firm is unlikely to convert all at once. First launches of ETF share classes will take place in early 2026. Vanguard—previously the only firm employing the hybrid structure—had held a 20-year patent that expired in 2023. DFA filed shortly after expiration and took preliminary clearance in September, paving the way for this week's final approval.
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For the broader market, the move could be a watershed. Big-name issuers from Fidelity to Goldman Sachs have pending or planned applications, betting the hybrid mutual-fund/ETF structure can lower costs, improve tax efficiency and attract millions in new flows.
Some ETF categories may feel the impact first. DFA’s strength in factor-driven large-cap value and small-cap strategies might put pressure on existing funds such as the iShares Russell 1000 Value ETF (NYSE:IWD), Vanguard Small-Cap ETF (NYSE:VB) and Schwab U.S. Small-Cap ETF (NYSE:SCHA). If DFA’s share classes offer competitive fees, investors might rotate toward new ETF wrappers mirroring historically popular DFA mutual funds.
Industry groups praised the decision as a win for investors. "This will deliver meaningful benefits to mutual fund shareholders," said Eric Pan, president and chairman of the Investment Company Institute, per Reuters. DFA co-CEO and co-CIO Gerard O'Reilly underscored the investor-centric design: choose the strategy first, then the preferred wrapper, mutual fund or ETF.
With dozens of similar applications pending, 2026 may be the year that ETF share classes go from niche to mainstream.
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