Morningstar

Dimensional World Equity SGD Acc

Analyst Report
Morningstar's Take
|25/08/2023
by Dimitar Boyadzhiev
Dimensional Global Core Equity offers broad exposure to stocks from 23 developed countries. Resting on the research of renowned academics such as Eugene Fama and Kenneth French, the strategy gives overweightings to stocks with lower valuations (measured by price/book ratio), smaller market caps, and higher profitability (using an adjusted measure of operating income). Research shows that stocks with these characteristics have tended to outperform over the long term. The managers exclude the most expensive and unprofitable companies completely and apply market-cap multipliers to give under- or overweightings to the remaining stocks, depending on how much they possess the desired characteristics.

The resulting portfolio is broad and well-diversified, with overweightings of smaller stocks at the expense of larger stocks, and a marginally lower return on investment capital compared with the average peer in the global large-cap blend Morningstar Category.

The use of market-cap multipliers to weigh holdings has limited fund turnover. It has also led to a modest bias toward the North American markets' stocks at the expense of European stocks. Performance has ranked in the top quartile of the category on a risk-adjusted basis during the trailing 10-year period.

The fund is a representative and well-diversified strategy that consists of nearly 13,000 holdings with a tilt toward smaller, cheaper, and more-profitable companies. In addition, the weighting approach limits turnover, trades are executed efficiently, and the fees (0.35%) are among the lowest relative to rival active peers. With these attributes, we can expect the fund to continue producing superior risk-adjusted returns relative to peers.

 
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Morningstar Pillars
PeopleAbove Average
ParentHigh
ProcessAbove Average
 
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