Dimensional’s Gerard O’Reilly Discusses Firm’s Growth & Pursuit of ETF Share Class Structure

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On this episode of ETF Prime, host Nate Geraci speaks with a trio of individuals to discuss several different ETF-related topics. His guests include VettaFi’s Lara Crigger who discusses the ETF share class structure, Grayscale’s letter to the SEC, and recent ETF launches. Geraci also speaks with Dimensional Co-CEO Gerard O’Reilly about his firm’s SEC application for ETF share class exemptive relief. To close the podcast, Geraci speaks with Sage Advisory’s Komson Silapachai about the firm’s ETF-focused portfolios.

The ETF Share Class Structure

Geraci opens the podcast with Lara Crigger of VettaFi, discussing the ETF Share Class Structure. The pair discuss how Vanguard is the firm that has traditionally used the ETF Share Class Structure. Geraci also mentions how for the most part Vanguard has only used it thus far for index-based funds. As where now firms like Dimensional, and others want to use it for active funds. Geraci then poses the question to Crigger, about her thoughts on how the SEC will respond to Dimensional’s SEC application for ETF share class exemptive relief. Crigger suggests that it is hard to say how the SEC will respond to this application, and she doesn’t see a definitive answer one way or another. However, Crigger says that many firms take different approaches to active management, and Dimensional’s approach may help them in this current situation.

“If anyone can do it is probably Dimensional,” Crigger said. In addition, the conversation touches on how the ETF Share Class Structure model can benefit portfolios.

Grayscale’s Letter to the SEC

The discussion shifts gears as Geraci brings up the recent letter that Grayscale sent to the SEC. Geraci highlights how the letter itself mentions that Grayscale feels that the SEC should approve spot Bitcoin ETFs, because of its past approval of Bitcoin futures ETFs. Crigger discusses the question that the SEC has constantly raised regarding these types of products is the strength of the surveillance surrounding them. She mentions that this has been the main pushback from the SEC since the inception of these products. Overall, Crigger tends to agree with Grayscale’s letter. She feels that the firm has made several prevalent points when discussing this argument.

“If these filings do get approved it would make me my scratch head about the consistency of the argument,” Crigger said. The pair continue the conversation discussing what they ultimately expect to happen between the SEC and Grayscale. To close the segment Crigger and Geraci discuss recent ETF launches and filings.

Dimensional’s SEC Application

The conversation shifts to Dimensional when Geraci speaks with the firm’s Co-CEO Gerard O’Reilly. Before they jump into that conversation Geraci highlights the significant success the firm has had in less than three years of existence. The firm itself has over thirty ETFs and is about to hit $100 billion in assets, making them the largest actively managed ETF issuer by assets. The pair also discuss the firm’s recent SEC application for ETF share class exemptive relief. O’Reilly believes that now is the right time for this because the firm has demonstrated how to successfully implement a systematic active approach. Geraci then shifts the conversation to some of the concerns the SEC has had in the past regarding similar applications. He then asks O’Reilly what he and his firm are doing to address these concerns.

O’Reilly said, “Our predominant approach is to focus on the benefits this structure offers.” O’Reilly feels that by focusing on the benefits of this sort of approach they can reveal the success it can potentially offer investors. To close the conversation, Geraci and O’Reilly continue to go in-depth about what Dimensional hopes to accomplish with this application.

ETF-Focused Portfolios

Geraci then speaks with Komson Silapachai a partner at Sage Advisory to close the podcast. The pair talk about the firm’s ETF-focused portfolios. Geraci also mentions how Sage is one of the largest tactical ETF portfolio managers in the country. Geraci then inquires about Sage and their strategies. Silapachai goes in-depth on the firm use of what they refer to as “tactical strategies” when building portfolios.

“We try to really express our macro views within a risk-managed framework,” said Silapachai. The podcast then closes with Silapachai going in-depth into how the firm curates some of its ETF-focused portfolios, and the strategies behind them.