Info about upcoming conversion of DFA's US Tax-Managed mutual funds to ETFs

We wanted to provide you with an update regarding Dimensional funds. The Dimensional Fund Advisors (DFA) US tax-managed funds listed below will be converting from a mutual fund structure to an exchange traded fund (ETF) structure. It’s important to note we are closely reviewing this conversion and there is no action required on your part.  We wanted to ensure you had notice of this change as you may be receiving information from your custodian, or a service provider your custodian uses to notify shareholders of the conversion.
  • Tax-Managed US Equity Portfolio - converting to Dimensional US Equity ETF
  • T.A. US Core Equity 2 Portfolio - converting to Dimensional US Core Equity 2 ETF
  • Tax-Managed US Small Cap Portfolio - converting to Dimensional US Small Cap ETF
  • Tax-Managed US Targeted Value Portfolio - converting to Dimensional US Targeted Value ETF
Also important to note is that the investment objectives of these funds will not be changing. DFA believes the conversion to an ETF structure will be a benefit to shareholders through potentially greater tax efficiency, which is complementary to the investment objective of the tax-managed funds that are designed to maximize after-tax returns. The funds will also have a lower expense ratio post-conversion which will be a benefit for our clients.

The conversion from mutual funds to ETFs will be organized as a tax-free event for US tax purposes so we anticipate no taxes related to the conversion of full shares. There may be some cases where fractional shares are held in the mutual fund and at the current time, ETF shares are not issued in fractional shares. In this case, mutual fund shares will be redeemed and paid out which may result in a very small taxable event. For example, if a fractional share of $25 was held and redeemed, the relevant tax rate would be applied to the capital gain portion of this single fractional share resulting in total taxes paid of less than $25.

The conversion is expected to take place in June. After the conversion, the mutual funds will no longer exist and any new investment in these particular strategies will be into the ETFs. Again, in the coming weeks you may receive information notifying you of this change and providing additional details about the conversion. We are happy to answer any questions you may have about this or any other items with your planning.

Thank you again for having us be your CPA and financial advisor.