Core Equities
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Canadian Core Equity Strategy DFA Canadian Core Equity Fund Class A DFA Canadian Core Equity Fund Class F |
US Core Equity Strategy DFA US Core Equity Fund Class A DFA US Core Equity Fund Class F |
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| International Core Equity Strategy DFA International Core Equity Fund Class A DFA International Core Equity Fund Class F |
The mutual funds managed by Dimensional 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 core equity funds are described below. Specific information about the individual funds discussed can be found in the prospectus.
Applied Core Equity Strategies
Portfolio structure forms the basis of Dimensional strategies and provides the framework to implement insights from financial science and practical experience. The engineered approach to applied core equity is a natural evolution of our experience in building multifactor strategies, newly modified for greater efficiency. Because the core equity architecture is seamlessly integrated across the full range of securities, the turnover and transaction costs normally associated with maintaining multiple components are strongly reduced.
Dimensional's applied core equity strategies are designed to capture a broad and diverse mix of readily marketable common stocks in each market universe they target, with increased exposure to value and small stocks.
The total market is weighted by market capitalization (price times shares outstanding). The applied core equity strategies alter the weighting of stocks by considering both a company's market cap and its book-to-market (BtM) ratio. As a result, exposure to the riskier small and value shares that research shows offer higher expected return is increased. To balance out the greater small and value exposure and still include every stock in the market, the weight of large cap and growth stocks is reduced.
Canadian Core Equity
The Canadian Core Equity Fund 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.
Dimensional uses the ratio of book equity to market equity (BtM) to identify value and growth stocks in the Canadian Core Equity Fund. When assessing value, Dimensional may also consider other factors such as a company's price-to-cash-flow ratio and price-to-earnings ratio. To tilt the 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 Canadian Core Equity Fund.
US Core Equity
Dimensional Canada's US applied core equity strategy is designed to capture a broad and diverse group of readily marketable common stocks of US companies, with a modest tilt toward value and small stocks.
To tilt the US Core Equity Fund away from the market portfolio toward value and small cap stocks, we increase the target weight on value stocks and small stocks and reduce the target weight on growth stocks and large stocks. As a result, popular marketwide indices such as the Dow Jones Wilshire 5000 Index and the Russell 3000 Index tend to have higher average market capitalizations and lower average book-to-market or earnings-to-price ratios than does the US Core Equity Fund.
In order to increase the small or value tilts that the US Core Equity Fund provides, an allocation of Dimensional's US Small Cap Fund or US Value Fund could be added. Based on the relative weights of each component, such an allocation mix would be more concentrated in the small and value asset classes and would increase the risk level of an investment strategy.
International Core Equity
DFA Canada's international applied core equity strategy is designed to capture a broad and diverse group of readily marketable non-Canadian and non-US companies in countries in developed markets, with a modest tilt toward value and small stocks. Currently, the fund is authorized to invest in Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
To tilt the International Core Equity Fund away from the market portfolio toward value and small cap stocks, we increase the target weight on value stocks and small stocks and reduce the target weight on growth stocks and large stocks. As a result, popular marketwide indices such as the MSCI World Index tend to have higher average market capitalizations and lower average book-to-market or earnings-to-price ratios than does the International Core Equity Fund.
In order to increase the small or value tilts that the International Core Equity Fund provides, an allocation of Dimensional Canada's International Small Cap Fund or International Value Fund could be added. Based on the relative weights of each component, such an allocation mix would be more concentrated in the small and value asset classes and would increase the risk level of an investment strategy.
Tax Management
Dimensional manages capital gains and dividends for the 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.