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DFA Cracks Vanguard's Two-Decade Monopoly on ETF Share Classes

MarketDash Editorial Team
19 days ago
Dimensional Fund Advisors just became the first firm in over 20 years to win SEC approval for ETF share classes on existing mutual funds, breaking Vanguard's long-held patent advantage and potentially reshaping how investors access tax-efficient, low-cost funds.

Dimensional Fund Advisors just pulled off something no other asset manager has managed in over two decades: winning SEC approval to launch ETF share classes on existing mutual funds. The regulator gave the green light late Monday, clearing the way for DFA to replicate a structure that Vanguard has had entirely to itself since the early 2000s, according to a Reuters report.

How a Patent Expiration Changed Everything

The approval covers 13 DFA mutual funds, though sources suggest the firm won't flip the switch on all of them simultaneously. The first ETF share classes should hit the market in early 2026. Vanguard's advantage came from a 20-year patent that expired in 2023, and DFA wasted no time filing for approval shortly after. They secured preliminary clearance in September, setting up this week's final sign-off.

Why This Could Reshape the ETF Market

This isn't just about DFA. The broader implications could be massive. Heavy hitters from Fidelity to Goldman Sachs have applications pending or in the works, all betting that this hybrid mutual-fund-ETF structure can slash costs, boost tax efficiency, and pull in billions of new investment flows.

Certain corners of the ETF world might feel the heat more quickly than others. DFA has built a reputation around factor-driven strategies in large-cap value and small-cap stocks, which could put competitive pressure on established funds like the iShares Russell 1000 Value ETF (IWD), Vanguard Small-Cap ETF (VB), and Schwab U.S. Small-Cap ETF (SCHA). If DFA's share classes come out swinging with competitive pricing, investors might start rotating toward these new ETF wrappers that mirror DFA's historically popular mutual fund strategies.

The Industry Reaction

Industry watchers are calling this a win for everyday investors. Eric Pan, president and chairman of the Investment Company Institute, told Reuters that "this will deliver meaningful benefits to mutual fund shareholders." DFA co-CEO and co-CIO Gerard O'Reilly emphasized the investor-first philosophy: pick the strategy you want first, then decide whether you prefer the mutual fund or ETF wrapper.

With dozens of similar applications sitting in the SEC's queue, 2026 could be the year ETF share classes break out from niche oddity to mainstream reality. Vanguard's two-decade run as the only game in town is officially over.

Back to News

DFA Cracks Vanguard's Two-Decade Monopoly on ETF Share Classes

MarketDash Editorial Team
19 days ago
Dimensional Fund Advisors just became the first firm in over 20 years to win SEC approval for ETF share classes on existing mutual funds, breaking Vanguard's long-held patent advantage and potentially reshaping how investors access tax-efficient, low-cost funds.

Dimensional Fund Advisors just pulled off something no other asset manager has managed in over two decades: winning SEC approval to launch ETF share classes on existing mutual funds. The regulator gave the green light late Monday, clearing the way for DFA to replicate a structure that Vanguard has had entirely to itself since the early 2000s, according to a Reuters report.

How a Patent Expiration Changed Everything

The approval covers 13 DFA mutual funds, though sources suggest the firm won't flip the switch on all of them simultaneously. The first ETF share classes should hit the market in early 2026. Vanguard's advantage came from a 20-year patent that expired in 2023, and DFA wasted no time filing for approval shortly after. They secured preliminary clearance in September, setting up this week's final sign-off.

Why This Could Reshape the ETF Market

This isn't just about DFA. The broader implications could be massive. Heavy hitters from Fidelity to Goldman Sachs have applications pending or in the works, all betting that this hybrid mutual-fund-ETF structure can slash costs, boost tax efficiency, and pull in billions of new investment flows.

Certain corners of the ETF world might feel the heat more quickly than others. DFA has built a reputation around factor-driven strategies in large-cap value and small-cap stocks, which could put competitive pressure on established funds like the iShares Russell 1000 Value ETF (IWD), Vanguard Small-Cap ETF (VB), and Schwab U.S. Small-Cap ETF (SCHA). If DFA's share classes come out swinging with competitive pricing, investors might start rotating toward these new ETF wrappers that mirror DFA's historically popular mutual fund strategies.

The Industry Reaction

Industry watchers are calling this a win for everyday investors. Eric Pan, president and chairman of the Investment Company Institute, told Reuters that "this will deliver meaningful benefits to mutual fund shareholders." DFA co-CEO and co-CIO Gerard O'Reilly emphasized the investor-first philosophy: pick the strategy you want first, then decide whether you prefer the mutual fund or ETF wrapper.

With dozens of similar applications sitting in the SEC's queue, 2026 could be the year ETF share classes break out from niche oddity to mainstream reality. Vanguard's two-decade run as the only game in town is officially over.