DFA Wins SEC Approval to Introduce ETF Share Classes

The U.S. Securities and Exchange Commission has officially approved Dimensional Fund Advisors’ proposal to add exchange-traded fund (ETF) share classes to 13 of its existing mutual funds, marking a major milestone for the asset manager and the broader investment industry. The SEC notice, posted late Monday, clears the final regulatory hurdle and positions DFA to become the first firm in more than 20 years to introduce ETF share classes on mutual funds, following the expiration of Vanguard’s long-held patent in 2023.

Vanguard has been the only provider allowed to offer ETFs as a share class within a mutual fund structure, a product design that became protected by a 20-year patent. After that patent expired last year, DFA quickly moved forward with its application and received initial approval this past September. The company requested authorization for ETF share classes on 13 mutual funds, though sources familiar with the process say DFA will likely roll out the new structure gradually, potentially beginning in early 2026.

Industry advocates say the approval marks a significant step toward expanding cost-efficient and tax-efficient investment options for investors. Eric Pan, president and chairman of the Investment Company Institute, said the decision will provide “meaningful benefits to mutual fund shareholders,” noting that combined structures allow asset managers to pool distribution and operational expenses across multiple share classes.

Supporters also emphasize that ETF share classes give investors more flexibility by letting them choose an investment strategy first and then select the most suitable vehicle—mutual fund or ETF—to access it. DFA co-CEO and co-CIO Gerard O’Reilly highlighted this advantage, stating that share-class flexibility allows investors to streamline their choices and pursue long-term strategies more efficiently.

The SEC’s approval is widely expected to pave the way for many other asset managers seeking to capture a larger share of the fast-growing ETF market, potentially reshaping how traditional mutual funds compete in the evolving investment landscape.