Dimensional Fund Advisors, a $719 billion Austin, Texas-based investment manager that sponsors ETFs, mutual funds and separately managed accounts, is rolling out a new unified managed account platform next month.
The UMA platform — an expansion of Dimensional's SMA capabilities that launched two years ago — will enable advisors to manage investments including Dimensional's 38 ETFs, more than 1,500 approved third-party ETFs and nine current SMA strategies of Dimensional in a single interface. The new functionality will officially launch on July 8. (FundFire first reported the news last week.)
“One unique aspect of what we offer is that we are an asset manager that offers the tax management overlay of the SMA and ETF model, which facilitates tax management across the board,” said Kaitlin Hendrix, director of allocation research. of assets and vice president, Dimensional. Fund Advisors. “If you generate a loss while rebalancing within the ETF sleeve, you may realize a profit while rebalancing within the SMA for a net neutral event. By having the same asset manager manage SMA and UMA, all the pieces can work well together to bring the portfolio closer to the target.”
The UMA platform will allow advisors to build ETF-only portfolios with dimensional and non-dimensional ETFs or combine ETFs with individual direct securities in a single account. It will also eventually add support for mutual funds. Dimension's system will manage daily asset allocation, tax considerations and cash balances.
The expansion of functionality is in line with broader trends in advisor adoption of UMAs.
“This is about syncing with the reality that advisors must be able to work across the entirety of a client's portfolio in order to properly execute overlapping services such as portfolio construction, tax loss harvesting, direct indexing and Similar.” said Neil Bathon, founder and partner at FUSE Research Network. “Honestly, I'm surprised they hadn't already participated in this much-needed platform upgrade.”
Advisors can use Dimensional ETFs and SMAs to customize equity and fixed income allocations, as well as regional focuses. SMAs within the platform can be customized for individual tax management needs, ESG considerations, as well as individual stock, industry, sector or country preferences.
Placing multiple investments in or can allow for more efficient harvesting of tax losses, gifts and cash needs in a pool of investments. Developments in technology, along with increased experience using the systems, have enabled UMAs to be offered to investors at lower minimums. In the past, UMAs were only available to high net worth investors with minimum accounts of $20 million or more. But Dimensional's current SMAs and the new UMA are open to investors with a minimum account size of $500,000.
“Dimensional has over 20 years of expertise in managing funds of funds and sophisticated tax management accounts. It can be quite complex,” said Hendrix. “Technology is part of it, but we also have the expertise to use technology to deliver results from investors.”
Currently, more than 200 advisors managing 900 accounts use Dimensional SMAs. They will have access to UMA functions.