SEC Approves Dimensional Fund Advisors’ Launch of ETF Share Class for 13 Mutual Funds
A major regulatory shift opens the door for a new era of investment products, as the SEC clears DFA to introduce ETF share classes that could reshape how investors access long-standing mutual fund strategies.
The U.S. Securities and Exchange Commission has granted Dimensional Fund Advisors approval to introduce an exchange-traded fund share class across 13 of its existing mutual funds, marking the most significant product-structure change in the asset-management sector in more than two decades.
The move positions DFA as the first new entrant since the early 2000s to receive such authorization, signaling growing regulatory openness toward hybrid fund designs.
The ruling removes the final regulatory obstacle that had prevented the firm from moving forward with its ETF share-class plans.
Analysts expect the decision to accelerate similar applications from competitors seeking a foothold in the rapidly expanding ETF universe.
The approval comes at a moment when investors increasingly prioritize cost, tax efficiency and trading flexibility—advantages that ETFs often offer over traditional mutual funds.
By granting the option to introduce ETF share classes, regulators are effectively enabling fund companies to streamline operations and reduce duplicated administrative costs.
This shift follows the expiration of a twenty-year patent previously held by Vanguard, the only firm until now authorized to operate ETF share classes alongside institutional and retail mutual fund share classes.
With the patent expiring in 2023, other asset managers promptly began exploring opportunities to adapt the model, with DFA emerging as one of the first to file a comprehensive regulatory request.
DFA’s application included approval to add ETF share-class options to 13 mutual funds, though sources familiar with the process suggest the company will not launch all of them immediately.
The earliest ETF share-class offerings are expected to debut in early 2026 as operational preparations continue.
Industry groups welcomed the decision, viewing it as a win for investors who may benefit from lower overall fund operating costs.
According to the Investment Company Institute, pooling certain expenses across mutual fund and ETF share classes could help reduce long-term costs for shareholders.
Supporters say the model offers investors greater flexibility by allowing them to focus first on the investment strategy itself, and only then decide which structure—ETF or mutual fund—best meets their needs.
This flexibility is increasingly important as investors diversify across platforms, account types and tax situations.
Advocates also note that the ruling may encourage modernization across the asset-management industry at a time when ETFs continue to attract a disproportionate share of new investment flows.
For many fund providers, adding ETF share classes could help sustain relevance in a market that increasingly rewards efficiency and transparency.
Even with the approval in place, industry analysts anticipate ongoing debate surrounding operational harmonization and tax implications as more firms pursue similar applications.
However, they see the SEC’s decision as a sign that regulators are willing to consider product innovations that enhance investor choice while maintaining adequate safeguards.
For DFA, this development marks a milestone in its broader strategy to deepen its presence in the ETF space while remaining rooted in its academic-based investment philosophy.
Company executives emphasize that ETF share classes will expand investor access to DFA strategies without requiring the creation of entirely new funds.
As other asset managers prepare to follow DFA’s example, the industry may be approaching a transformative period in which mutual fund and ETF ecosystems become more interconnected.
If the momentum continues, ETF share classes could become one of the most defining structural innovations shaping the future of investment products.
