DFA to run ETFs for John Hancock

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larryswedroe
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DFA to run ETFs for John Hancock

Post by larryswedroe »

http://www.thestreet.com/story/13215522 ... -etfs.html
sure this will be of interest (:-))
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Re: DFA to run ETFs for John Hancock

Post by stratton »

Six ETFs:
John Hancock Multifactor Large Cap ETF
John Hancock Multifactor Mid Cap ETF
John Hancock Multifactor Consumer Discretionary ETF
John Hancock Multifactor Financials ETF
John Hancock Multifactor Healthcare ETF
John Hancock Multifactor Technology ETF
I'm only considering the first two of interest to me.

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Re: DFA to run ETFs for John Hancock

Post by jhfenton »

In theory DFA-advised ETFs would be of interest. Those specific six ETFs...not so much. Beyond the John Hancock name and likely unreasonable expenses, four of them are sector funds. Bah. And there's no shortage of large cap and mid cap funds with various index designs.
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Re: DFA to run ETFs for John Hancock

Post by lack_ey »

And then next thing we know, there's a dry spell for the multifactor approach and John Hancock switches advisers.
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Re: DFA to run ETFs for John Hancock

Post by nisiprius »

Wait a minute.

1) How can DFA apply their approach to ETFs? I thought they depended on "patient trading," on being free not to track an index closely, and being able to discourage investors from performance chasing--all of which would be difficult or impossible with an ETF.

2) And, come to think of it, the most-frequently-mentioned DFA funds, the ones that slice-and-dicers often claim to be better than their Vanguard equivalents, are DFA US Micro Cap Fund, DFSCX, and DFA US Small Cap Value Portfolio, DFSVX. In fact, Larry Swedroe himself made that claim for DFSVX in A Tale of Two Small Value Funds. And yet, that ETF lineup omits exactly the asset class most cherished and most mentioned as DFA's forte.

Oddly, the press release says to read the prospectus but provides no link to the prospectus... and no ticker symbols... and I can't find the prospectus by Googling, does anyone have one?

Do "John Hancock Multifactor Large Cap ETF" and "John Hancock Multifactor Medium Cap ETF" contain what their name implies, or do they (somehow) apply a small value tilt--an extra-small, highly value-y, ex-utilities, screened for momentum tilt--to their core asset class?

Will these be "real" DFA products in the authentic DFA tradition? Or is DFA just slapping their brand name on some kind of plain-ordinary-not-quite-cap-weighted product?
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Re: DFA to run ETFs for John Hancock

Post by lack_ey »

There are actively managed ETFs these days and many products not following indexes. I don't get why DFA wouldn't be able to apply their approach and trading techniques in an ETF.

I also don't understand why they wouldn't be able to do the usual DFA-secret-sauce stuff like screen on whatever it is they do (cost of shorting, profitability maybe, momentum, etc.?) in these asset classes. They're not all about small and value, though it's quite possible they will be tilting in those directions in those funds. In fact, most randomly constructed portfolios (okay, this needs to be defined in a stricter way to be true, but I'll just wave hands and move on) in a given universe are tilted to small and value compared to market cap weighting.
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Re: DFA to run ETFs for John Hancock

Post by pascalwager »

Are the last four ETFs legitimate asset classes based on investment theory or historical returns? This is surprising! Maybe they'll come with a Fama/French disclaimer.
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Re: DFA to run ETFs for John Hancock

Post by Robert T »

.
John Hancock already has version of DFA EM Value (JEVNX)

For the ETFs - here's the preliminary prospectus
https://www.sec.gov/Archives/edgar/data ... 9_n1aa.htm

0.35% ER for Large Cap ETF, and 0.45% ER for Mid Cap ETF. Perhaps are 'core' type tilt - not sure.

For the Large Cap fund - objective and principle investment strategy.
To seek to provide investment results that closely correspond, before fees and expenses, to the performance of the John Hancock Dimensional Large Cap Index (the Index)....

...The fund normally invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities that compose the fund's benchmark index. The Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are larger than that of the 801st largest U.S. company at the time of reconstitution. In selecting and weighting securities in the Index, the Index Service Provider uses a rules-based process that incorporates sources of expected returns. This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta. As currently contemplated, securities are classified according to their market capitalization, relative price, and profitability. Weights for individual securities are then determined by adjusting their natural weight within the universe of eligible names so that names with smaller market capitalizations, lower relative price and higher profitability generally receive an increased weight relative to their natural weight, and vice versa. A sample of securities within the eligible universe is then selected for inclusion in the Index, taking into account each security's price momentum, and weighted relative to the weights that were determined as described above. The Index is reconstituted and rebalanced on a semiannual basis. The U.S. Universe is defined as a free float adjusted market capitalization weighted portfolio of U.S. operating companies listed on the New York Stock Exchange (NYSE), NYSE MKT LLC, NASDAQ Global Market or such other securities exchanges deemed appropriate by the Index Service Provider, in accordance with the rules-based methodology.

The fund, using an indexing investment approach, attempts to approximate the investment performance of the Index by investing in a portfolio of securities that generally replicates the Index. The fund may concentrate its investments in a particular industry or group of industries to the extent that the Index concentrates in an industry or group of industries.
Surprising DFA is getting into sector funds (after what they have written about them - at least Fama Jr) - not a great sign IMO.

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Re: DFA to run ETFs for John Hancock

Post by Rick Ferri »

I knew they couldn't stay away. There's just too much money going into ETFs.

INVESTMENT OBJECTIVE (of the U.S Large Cap Multifactor fund)

To seek to provide investment results that closely correspond, before fees and expenses, to the performance of the John Hancock Dimensional Large Cap Index (the Index).

SUBADVISOR

Dimensional Fund Advisors LP ("Dimensional")
6300 Bee Cave Road, Building One
Austin, Texas 78746

Dimensional was organized in 1981 as Dimensional Fund Advisors, Inc., a Delaware corporation, and in 2006, it converted its legal name and organizational form to Dimensional Fund Advisors LP, a Delaware limited partnership. Dimensional is engaged in the business of providing investment management services. Since its organization, Dimensional has provided investment management services primarily to institutional investors and mutual funds. As of June 30, 2015, Dimensional and its advisory affiliates managed approximately $[ ] billion in assets under management.
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Re: DFA to run ETFs for John Hancock

Post by pascalwager »

nisiprius wrote:Wait a minute.

1) How can DFA apply their approach to ETFs? I thought they depended on "patient trading," on being free not to track an index closely, and being able to discourage investors from performance chasing--all of which would be difficult or impossible with an ETF.

2) And, come to think of it, the most-frequently-mentioned DFA funds, the ones that slice-and-dicers often claim to be better than their Vanguard equivalents, are DFA US Micro Cap Fund, DFSCX, and DFA US Small Cap Value Portfolio, DFSVX. In fact, Larry Swedroe himself made that claim for DFSVX in A Tale of Two Small Value Funds. And yet, that ETF lineup omits exactly the asset class most cherished and most mentioned as DFA's forte.

Oddly, the press release says to read the prospectus but provides no link to the prospectus... and no ticker symbols... and I can't find the prospectus by Googling, does anyone have one?

Do "John Hancock Multifactor Large Cap ETF" and "John Hancock Multifactor Medium Cap ETF" contain what their name implies, or do they (somehow) apply a small value tilt--an extra-small, highly value-y, ex-utilities, screened for momentum tilt--to their core asset class?

Will these be "real" DFA products in the authentic DFA tradition? Or is DFA just slapping their brand name on some kind of plain-ordinary-not-quite-cap-weighted product?
1) Presumably, JH would act as a typical DFA advisor and initiate any trades in accordance with DFA rules.
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Re: DFA to run ETFs for John Hancock

Post by Robert T »

.
Rick Ferri wrote:I knew they couldn't stay away. There's just too much money going into ETFs.
I recall you saying/predicting this. I see iShares net assets are up to about 810bn.
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Re: DFA to run ETFs for John Hancock

Post by cfs »

Thanks.

Thanks Larry for the link to the article.

A lot of companies jumping on the ETF bandwagon.

Time for me to reserve my very own ETF.
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Re: DFA to run ETFs for John Hancock

Post by stlutz »

This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta. As currently contemplated, securities are classified according to their market capitalization, relative price, and profitability. Weights for individual securities are then determined by adjusting their natural weight within the universe of eligible names so that names with smaller market capitalizations, lower relative price and higher profitability generally receive an increased weight relative to their natural weight, and vice versa. A sample of securities within the eligible universe is then selected for inclusion in the Index, taking into account each security's price momentum, and weighted relative to the weights that were determined as described above. The Index is reconstituted and rebalanced on a semiannual basis.
I'm not quite clear. Is the focus here on re-weighting securities (e.g. like fundamental indexing) or on selecting the best ones (e.g. like standard value ETFs)? Or is this something like those "pure value" ETFs (e.g. RPV) that are doing both?
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Re: DFA to run ETFs for John Hancock

Post by Swampy »

Is this a possibly a reason to consider dumping DFA?
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Re: DFA to run ETFs for John Hancock

Post by Code Commit »

Rick Ferri wrote:I knew they couldn't stay away. There's just too much money going into ETFs.
This nails it. Despite all their talk about how handholding by advisors was crucial in investing in their funds, they just couldn't ignore the popularity of ETFs anymore. Still, quite unimpressive lineup of ETFs for the time being.
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Re: DFA to run ETFs for John Hancock

Post by BigJohn »

Code Commit wrote: Despite all their talk about how handholding by advisors was crucial in investing in their funds.....
I never really bought this line from DFA. Frankly I see it as no different than the pitches that active fund managers make when they say you have to pay a premium price to get their premium stock picking skills. Just another market technique to generate fees and give then an illusion of exclusivity.
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Re: DFA to run ETFs for John Hancock

Post by Angst »

I have to say I'm a little amused by all the barbs and attitude directed at DFA. "John Hancock"... now that's always amusing! But the idea that DFA is beginning to develop its ETF expertise and put product out there on the market is nothing but good news to me. I don't care how difficult it will be to implement "patient trading". I don't care if this represents some inconsistency with past statements made by people associated with DFA. And I don't even care if their first foray into the world of ETFs involves "John Hancock" branded products which I'll have no interest in purchasing; but what's not to like about the prospect of eventually having the opportunity to access other DFA managed ETFs? It represents more competition in one of the segments of the ETF market that interests me a lot, and I like that.
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Re: DFA to run ETFs for John Hancock

Post by RNJ »

Angst wrote:I have to say I'm a little amused by all the barbs and attitude directed at DFA. "John Hancock"... now that's always amusing! But the idea that DFA is beginning to develop its ETF expertise and put product out there on the market is nothing but good news to me. I don't care how difficult it will be to implement "patient trading". I don't care if this represents some inconsistency with past statements made by people associated with DFA. And I don't even care if their first foray into the world of ETFs involves "John Hancock" branded products which I'll have no interest in purchasing; but what's not to like about the prospect of eventually having the opportunity to access other DFA managed ETFs? It represents more competition in one of the segments of the ETF market that interests me a lot, and I like that.
And as Rick has stated, there was a certain inevitability to this given the amount of money to be made. In my view, the issue is not the decision to move into the ETF market. Rather it is their choice of partner (JH).
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Re: DFA to run ETFs for John Hancock

Post by Angst »

RNJ wrote:And as Rick has stated, there was a certain inevitability to this given the amount of money to be made. In my view, the issue is not the decision to move into the ETF market. Rather it is their choice of partner (JH).
Yes, it sure does sound kinda sleazy up front! But for someone in a lousy (JH) 401k, maybe the new DFA partnership could offer a glimmer of hope? The large and mid-cap funds' ER's are not blatantly inconsistent with what you might expect to pay for DFA product. (Not saying they would be worth it...) And the most important point might be that the indices are maintained by DFA. The ERs are what they are. It will be interesting to follow the ETFs performance over time. And it will be even more interesting if and when DFA develops additional ETFs. It makes me wonder though, what will JH really have a hand in? Just purely the marketing? Would they make/redeem creation units or would DFA do all that? From the customer point of view, I'd sure want DFA and not JH doing that, and most everything else I can think of regarding maintaining the ETFs and the tracking of their indices.
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Re: DFA to run ETFs for John Hancock

Post by lack_ey »

Angst wrote:
RNJ wrote:And as Rick has stated, there was a certain inevitability to this given the amount of money to be made. In my view, the issue is not the decision to move into the ETF market. Rather it is their choice of partner (JH).
Yes, it sure does sound kinda sleazy up front! But for someone in a lousy (JH) 401k, maybe the new DFA partnership could offer a glimmer of hope? The large and mid-cap funds' ER's are not blatantly inconsistent with what you might expect to pay for DFA product. (Not saying they would be worth it...) And the most important point might be that the indices are maintained by DFA. The ERs are what they are. It will be interesting to follow the ETFs performance over time. And it will be even more interesting if and when DFA develops additional ETFs. It makes me wonder though, what will JH really have a hand in? Just purely the marketing? Would they make/redeem creation units or would DFA do all that? From the customer point of view, I'd sure want DFA and not JH doing that, and most everything else I can think of regarding maintaining the ETFs and the tracking of their indices.
Unless I've missed information to the contrary, DFA is just the fund adviser (the portfolio manager, who picks the securities and so on). Lots of mutual fund companies run some or all funds using in-house managers. But for some others, they may instead hire another group to be the fund adviser. The fund company is responsible for interacting with investors and doing all the marketing and so on. The investment decisions are up to the adviser.

Vanguard's Wellington and Wellesley Income funds, among others, are run by Wellington Management Company. Some funds have multiple subadvisers each with a different split of the fund money to invest, like Vanguard Explorer, which is subadvised by the internal Vangaurd Equity Investment Group, Wellington again, and a host of others with names like Granahan, Chartwell, Kalmar, Century, Stephens, and Arrowpoint. Some ETFs are also run by an adviser who's outside the issuer, such as SSgA's SPDR DoubleLine Total Return, an active bond fund managed by Gundlach at DoubleLine. Frequently there's some partnership where the adviser's name gets thrown in for name recognition.

There's some kind of contract for the advisory role, though either party may at some point decide to part ways. Holders of AdvisorShares's Global Tactical ETF found one day that Meb Faber was moving on and AdvisorShares would replace Meb Faber's Cambria as adviser with Morgan Creek.

This is why near the top I said
lack_ey wrote:And then next thing we know, there's a dry spell for the multifactor approach and John Hancock switches advisers.
Hold this kind of fund in a taxable account, and if for whatever reason there's a split and DFA is no longer managing the funds, you may or may not be pleased with how security selection evolves in the future and may need to take a capital gains tax hit sell out of the fund. I mean, fund companies already like to hop indexes all the time. It happens.

Actual transaction and ETF redemption happen through third parties, and assets are held by a separate custodian, so it's really neither the fund issuer or the investment adviser doing the dirty work there of passing through assets and money. The adviser directs the timing and content of transactions.
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Re: DFA to run ETFs for John Hancock

Post by Angst »

lack_ey wrote:Unless I've missed information to the contrary, DFA is just the fund adviser (the portfolio manager, who picks the securities and so on). Lots of mutual fund companies run some or all funds using in-house managers. But for some others, they may instead hire another group to be the fund adviser. The fund company is responsible for interacting with investors and doing all the marketing and so on. The investment decisions are up to the adviser.

Vanguard's Wellington and Wellesley Income funds, among others, are run by Wellington Management Company. Some funds have multiple subadvisers each with a different split of the fund money to invest, like Vanguard Explorer, which is subadvised by the internal Vangaurd Equity Investment Group, Wellington again, and a host of others with names like Granahan, Chartwell, Kalmar, Century, Stephens, and Arrowpoint. Some ETFs are also run by an adviser who's outside the issuer, such as SSgA's SPDR DoubleLine Total Return, an active bond fund managed by Gundlach at DoubleLine. Frequently there's some partnership where the adviser's name gets thrown in for name recognition.

There's some kind of contract for the advisory role, though either party may at some point decide to part ways. Holders of AdvisorShares's Global Tactical ETF found one day that Meb Faber was moving on and AdvisorShares would replace Meb Faber's Cambria as adviser with Morgan Creek.

This is why near the top I said
lack_ey wrote:And then next thing we know, there's a dry spell for the multifactor approach and John Hancock switches advisers.
Hold this kind of fund in a taxable account, and if for whatever reason there's a split and DFA is no longer managing the funds, you may or may not be pleased with how security selection evolves in the future and may need to take a capital gains tax hit sell out of the fund. I mean, fund companies already like to hop indexes all the time. It happens.

Actual transaction and ETF redemption happen through third parties, and assets are held by a separate custodian, so it's really neither the fund issuer or the investment adviser doing the dirty work there of passing through assets and money. The adviser directs the timing and content of transactions.
Hmm, I see what you're saying, though I'd prefer to pick out similar examples explicitly with ETFs rather than mutual funds. I guess you might say Powershares (PXSV, eg.) is to John Hancock as RAFI and their Fundamental SV Index is to DFA and their latest "xyz" index used by JH. RAFI and DFA define the indices and Powershares and JH implement them. And as you alluded to in your earlier post, Powershares (and JH) can switch the index they track, as Powershares was forced to switch to the Russell Fundamental SV... (whatever it's called) index when RA abandoned the index used by PXSV up to recently, and so JH could just as easily abandon DFA's particular index, or be abandoned by DFA.

How carefully DFA defines the index might be just as important as how carefully JH follows those rules.

I'm not sure how I got my mind so set on the notion that DFA would have any more involvement. Thank you lack_ey. I still think it's a big deal that DFA has taken this step, JH's involvement notwithstanding. It's a big step in that if you just substitute the Powershares, iShares, Schwabs, etc. of the ETF world for JH, you've got something that might turn a few more heads. I'd also hope that DFA is concerned enough for its reputation such that they would want to ensure that JH tracks their ETF indices well.
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Re: DFA to run ETFs for John Hancock

Post by edge »

Very weird bedfellows.
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Re: DFA to run ETFs for John Hancock

Post by Robert T »

.
FWIW: What Makes An Asset Class? by Fama Jr. http://www.ifaarchive.com/%5Carticles%5 ... Class.aspx
??

In investing there seems to be risk + uncertainty. If you are targeting a particular risk exposure you want uncertainty to be close to zero, or at least try to minimize uncertainty. Choice of JH adds uncertainty (at least to me). Risk = a 'known' distribution of possible outcomes. Uncertainty = an "unknown" distribution of possible outcomes. I do not know what JH intends to do or will do (fly-by-night, etc), less certain of their actions relative to other options.

Interesting entrance into ETFs. Time will tell.

Robert
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Re: DFA to run ETFs for John Hancock

Post by RNJ »

Robert T wrote:.
FWIW: What Makes An Asset Class? by Fama Jr. http://www.ifaarchive.com/%5Carticles%5 ... Class.aspx
??

In investing there seems to be risk + uncertainty. If you are targeting a particular risk exposure you want uncertainty to be close to zero, or at least try to minimize uncertainty. Choice of JH adds uncertainty (at least to me). Risk = a 'known' distribution of possible outcomes. Uncertainty = an "unknown" distribution of possible outcomes. I do not know what JH intends to do or will do (fly-by-night, etc), less certain of their actions relative to other options.

Interesting entrance into ETFs. Time will tell.

Robert
.

Yes. JH is a wildcard.

According to M*, the DFA/JH EM offering (JEVNX) has attracted $2.3 Billion (yes, that's a "B") in assets. None of the RAFI/Powershares "pure" series ETFs (including PXSV) ever cracked $100M. Something the new DFA/JH offerings may have going for them is the fact that they come with a sales force and sizable 401k marketshare. Obviously, the ability to gather assets does not necessarily translate into great stewardship, but it may enhance the durability of the new funds.

Personally, I'm not interested.
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Re: DFA to run ETFs for John Hancock

Post by pkcrafter »

From ETF Trends:
The new filing provides details and expense ratios on the proposed ETFs. For example, the John Hancock Multifactor ETF, which is expected to charge 0.35% per year, will track an index comprised “ a subset of securities in the U.S. Universe issued by companies whose market capitalizations are larger than that of the 801st largest U.S. company at the time of reconstitution.

In selecting and weighting securities in the Index, the Index Service Provider uses a rules-based process that incorporates sources of expected returns. This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta.
Smart beta :confused ...blah, blah... We have performance chasing, and here we have investor chasing.

http://www.etftrends.com/2015/07/john-h ... beta-etfs/

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Re: DFA to run ETFs for John Hancock

Post by leonard »

Why would DFA sign up for a branding exercise?

Plus, having another intermediary John Hancock that doesn't do anything that DFA couldn't do themselves is just more expense.
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Re: DFA to run ETFs for John Hancock

Post by BigJohn »

leonard wrote:Why would DFA sign up for a branding exercise?
:moneybag
leonard wrote:Plus, having another intermediary John Hancock that doesn't do anything that DFA couldn't do themselves is just more expense.
Why would they (JH or DFA) care, they are spending someone else's money :twisted:
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Re: DFA to run ETFs for John Hancock

Post by leonard »

BigJohn wrote:
leonard wrote:Why would DFA sign up for a branding exercise?
:moneybag
leonard wrote:Plus, having another intermediary John Hancock that doesn't do anything that DFA couldn't do themselves is just more expense.
Why would they (JH or DFA) care, they are spending someone else's money :twisted:
My point is that DFA could pocket all the money themselves rather than give a cut to an extra, unneeded intermediary.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Re: DFA to run ETFs for John Hancock

Post by lack_ey »

DFA isn't public facing. They have the whole adviser network thing for access to mutual funds.

By just playing investment manager for John Hancock, they can avoid client interactions and support, like marketing, whatever that's worth for an ETF.
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Re: DFA to run ETFs for John Hancock

Post by leonard »

lack_ey wrote:DFA isn't public facing. They have the whole adviser network thing for access to mutual funds.

By just playing investment manager for John Hancock, they can avoid client interactions and support, like marketing, whatever that's worth for an ETF.
ETF's are bought and sold securities. Information about ETF's is everywhere. Exactly how much "public facing" work do you think an ETF manager does? The one time I contacted an ETF-managing company about an ETF - Wisdom Tree - they ignored my email anyway. I don't think the issuers of ETF's do public facing anything. They manage the ETF. DFA could do that without interacting with the public.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Re: DFA to run ETFs for John Hancock

Post by Robert T »

.
The Case for Multi-factor Investing (by DFA Portfolio Managers)
http://etf.jhinvestments.com/etf/docume ... FMFIWP.pdf

Some videos
Dimensional’s investment process: rooted in academic research
Seeking to build a better index (with David Booth)
Dimensional's approach to index construction
A closer look at Dimensional's investment process
http://etf.jhinvestments.com/etf/resear ... html#video

ETF Tickers

JHML = John Hancock Multifactor Largecap
JHMM = John Hancock Multifactor Midcap
http://etf.jhinvestments.com/etf/our-etfs.html

Robert
.
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Re: DFA to run ETFs for John Hancock

Post by jhfenton »

I don't see the attraction. Looking at JHML, I see a fund that overcharges for slightly re-weighting the largest 800 stocks in the U.S. market. I don't see how the slight re-weighting is going to add 30 or 40 bp of value. Same for JHMM with stocks 200-950 and an even higher fee.
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nisiprius
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Re: DFA to run ETFs for John Hancock

Post by nisiprius »

Larry, I get the impression from their website that Dimensional Fund Advisors now wants people to use "Dimensional" as their abbreviation or nickname, rather than "DFA."
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Re: DFA to run ETFs for John Hancock

Post by pkcrafter »

Hancock Dimentional Mid Cap Rulebook - Methodology

https://www.dimensional.com/media/docum ... lebook.pdf

Hancock Dimentional Large Cap Rulebook - Methodogy

https://www.dimensional.com/media/docum ... lebook.pdf
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larryswedroe
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Re: DFA to run ETFs for John Hancock

Post by larryswedroe »

few thoughts,
Nisi, DFA is shorter, I'll stick with it (:-))
Re why intermediary, DFA chooses to run their business that way, keeps their costs and headcount down. Also they may not even believe these Hancock products are "correct"--they got paid to develop and run them, doesn't mean they are recommending them. They are a profit making organization. Now I certainly don't speak for them and don't know what motivates them but that is my interpretation. They are delivering to Hancock what Hancock wants and getting paid for it. The rest is on Hancock
Larry
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Re: DFA to run ETFs for John Hancock

Post by Kenster1 »

Angst wrote:I have to say I'm a little amused by all the barbs and attitude directed at DFA. "John Hancock"... now that's always amusing! But the idea that DFA is beginning to develop its ETF expertise and put product out there on the market is nothing but good news to me. I don't care how difficult it will be to implement "patient trading". I don't care if this represents some inconsistency with past statements made by people associated with DFA. And I don't even care if their first foray into the world of ETFs involves "John Hancock" branded products which I'll have no interest in purchasing; but what's not to like about the prospect of eventually having the opportunity to access other DFA managed ETFs? It represents more competition in one of the segments of the ETF market that interests me a lot, and I like that.
Yes I would have to agree! It's an option out there run by a long-time and well-established Investment firm (J. Hancock) and these ETFs gives an option to those who were open to strategic beta ETFs.

These JH-Dimensional ETFs are constructed similar to the DFA Core Equity series. DFA is taking the market and applying a multifactor process to give more weighting to the following factors: smaller cap, lower relative price, and higher profitability --- and I believe they also throw in momentum as a trading strategy.

Again, I like their Core strategies as an efficient way to value-tilt. So you're not eliminating stocks - hey let's screen for the top 250 value stocks - they are including core and growth stocks but just re-weighting everything to give more emphasis to those 3 factors relative to the respective market-cap weighted asset class (Large/Midcap). Again, Dimensional has written about this strategy for years now.

So no this isn't a new strategy to select and keep the best value stocks. Again, the description of the structure and process behind the new ETFs - rings exactly from what I have read about the engineering and construction of their Core Equity Fund strategies over the past years.

I like that additional dimension of "profitability" or "quality" added. Cliff Asness wrote about this factor as well.

So I like seeing this as a nice option to compete.
- Powershares RAFI US 1000 Fundamental ETF has $4B in assets.
- Guggenheim S&P 500 Equal-Weight ETF has $9B in assets.
Schwab also has a handsome amount of money in their Fundamental Funds.

For those open to these types of factor or fundamental-based ETFs --- then these new JH-Dimensional ETFs should be welcomed news (but i'm referring to the 2 ETFs - Large and Midcap - not sure why they brought out the sector ETFs).
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Re: DFA to run ETFs for John Hancock

Post by Kenster1 »

.
In case anyone missed this Barrons article last year - good read about Dimensional Funds

http://webreprints.djreprints.com/51093.pdf

J. Hancock Funds also have almost 10 years experience working with Dimensional on similar funds - so they're not completely new to them.

Sure I wish these ETFs could have a 0.15% ER but they're still reasonable and in range with the marketplace for multifactor/fundamental type of ETFs. But it's interesting though why they didn't offer a Broad Market and Smallcap versions in their multifactor ETF lineup.

And of course the new 0.09% ER Goldman Sachs ActiveBeta Largecap ETF (somewhat similar multifactor-based ETF) is a different story. I guess they're not going to be making any money on this to drum up interest and to gain some traction - and there's also no licensing fees they have to account for as they created their own active-beta index.
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Re: DFA to run ETFs for John Hancock

Post by grok87 »

The one i might be interested is jhmm the mid cap etf. It now has a solid 1 month of performance!
:wink:

Month of october
Jhmm 6.37%
Vgd mid cap etf 6.03%
Vgd mc value 6.37%
Vgd mc groth 5.64%

So so far its performance seems ok. Would be interesting to see how it fares in the next market selloff...
RIP Mr. Bogle.
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