Canadian Equities
| Applied Core Equity Strategy Canadian Core Equity Fund Class A Canadian Core Equity Fund Class F |
The mutual funds managed by DFA Canada are available only to Canadian residents, through representatives authorized by us and affiliated with approved registered dealers.
The general investment approach and strategies we use to manage our Canadian equity funds are described below. Specific information about the individual funds discussed can be found in the prospectus.
Applied Core Equity Strategy
DFA Canada's Canadian applied core equity strategy is designed to capture a broad and diverse mix of readily marketable common stocks of Canadian companies, with a tilt toward value and small stocks.
Size and Value Tilts
Based on the research of Fama and French on the sources of risk and expected return, DFA Canada's core equity strategy is designed in part to capture a portion of the return premiums associated with small stocks and value stocks. Dimensional Fund Advisors has been a pioneer in small stock investing since 1981. Research documents that small companies and companies selling at low prices relative to their economic fundamentals have provided higher expected returns than large or growth companies in the long term.
Dimensional Fund Advisors uses the ratio of book equity to market equity (BtM) to identify value and growth stocks in the DFA Canadian Core Equity Fund. When assessing value, Dimensional Fund Advisors may also consider other factors such as a company's price-to-cash-flow ratio and price-to-earnings ratio. To tilt the DFA Canadian Core Equity Fund away from the market portfolio toward value stocks, we increase the target weight on value stocks and reduce the target weight on growth stocks. The same process takes place to tilt the portfolio toward small stocks. As a result, popular indices such as the S&P/TSX Composite Index and the Canadian component of the MSCI World Index tend to have higher average market capitalizations and lower average BtM than does the DFA Canadian Core Equity Fund.
Tax Management
Dimensional Fund Advisors manages capital gains and dividends for the DFA Canadian Core Equity Fund. Because the strategy's purpose is to serve both taxable and tax-exempt investors, a moderate amount of tax management is applied to the Fund. Although the goal is to defer the net realization of capital gains by harvesting losses and delaying the sale of some appreciated securities, the Fund is likely to realize and distribute some capital gains each year. Similarly, although Dimensional Fund Advisors reduces the target weight on dividend paying stocks, the Fund is likely to distribute some dividends each year.
Diversification
To limit the impact of any individual firm, Dimensional Fund Advisors will not purchase securities of a firm that is already more than 8% of the Fund's assets, and we will sell some of the firm's securities if their combined value grows to more than 10% of the Fund's assets.