The SEC has authorised Dimensional Fund Advisors to offer both exchange-traded fund and mutual fund share classes within a single fund, signalling a major shift in investment fund management and potentially transforming access and efficiency in the industry.
The U.S. Securities and Exchange Commission (SEC) has officially approved Dimensional Fund Advisors’ (DFA) request to offer both exchange-traded fund (ETF) and mutual fund share classes within the same fund structure, marking a significant milestone in investment fund management. With this approval, Dimensional becomes the second asset manager after Vanguard to receive such regulatory endorsement, and notably, the first to implement this model for actively managed products.
The SEC’s order, issued on Monday, grants Dimensional exemptions under the Investment Company Act of 1940 to manage dual share classes, both ETF and mutual fund, within a single fund. Following an application process that began in July 2023 and was amended multiple times through September 2025, the Commission concluded that the structure’s terms were “reasonable and fair” without concerns of overreach. This approval was delayed by the recent U.S. government shutdown but is now official.
Industry experts have widely praised the decision, seeing it as a forward-looking solution that aligns with the growing preference for ETFs while accommodating loyal mutual fund investors, particularly in retirement plans. John Russo, national leader of public investment management at KPMG US, described the structure as “a strategic pathway” for asset managers to modernize distribution channels and adapt active management strategies to the evolving market landscape. The Investment Company Institute (ICI), which actively advocated for such fund structures, also welcomed the approval as a positive development.
Dimensional’s co-CEO and co-CIO, Gerard O’Reilly, highlighted the significance of the regulatory green light. He said the ability to join mutual funds and ETFs through shared classes represents “a significant enhancement” for millions of Americans’ access to the financial markets, offering investors flexibility in choosing investment strategies while benefiting from enhanced tax efficiency and reduced costs derived from scale.
Dimensional’s ETFs have been pioneers in adopting custom creation and redemption baskets since their launch in 2020 to improve tax efficiency and reduce transaction costs. Under the new share-class framework, these benefits can be extended to mutual fund shareholders as well, reflecting a symbiotic relationship between ETF and mutual fund structures. ETF share classes are expected to benefit from stable cash flows contributed by mutual fund investors, while mutual funds could draw on the scale, diversification, and securities lending potential of Dimensional’s well-established lineup.
The approval enables Dimensional to roll out ETF share classes gradually for 13 of its existing U.S. equity mutual funds, anticipated to commence in early 2026. This timing aligns with the expected availability of industry infrastructure enhancements aimed at supporting the dual share class model. Depository Trust & Clearing Corporation (DTCC) plans to upgrade its Fund/SERV platform to automate mutual-fund-to-ETF-share-class conversions, reducing operational risks and manual work. Testing is slated for early 2026 with a projected launch by mid-year, subject to regulatory approvals.
Despite the enthusiasm, some practitioners have noted that adoption may be gradual. Kip Meadows, CEO of Nottingham and founder of the ETF Lighthouse platform, which facilitates the integration of ETF share classes, explained that while the dual-structure model addresses structural challenges in retirement plan investing, such as the need for fractional share ownership offered by mutual funds, demand buildup will likely be measured initially before accelerating.
The structural need is critical, particularly in retirement plans where contributions often involve precise, fractional-dollar allocations that ETFs cannot accommodate due to their requirement for whole-share purchases. This makes mutual funds structurally preferred in defined contribution plans, reinforcing the value of having both ETF and mutual fund share classes under a single fund umbrella.
Dimensional’s leadership believes that this model is potentially revolutionary, fundamentally transforming how funds are managed and accessed in the U.S. market. The firm’s extensive ETF expertise, combined with its mutual fund offerings, positions it as a pioneer in this innovative approach. With other asset managers closely monitoring Dimensional’s progress, the SEC’s approval is likely to catalyse similar filings and approvals, reshaping the active management landscape over the next decade.
Overall, this development marks a significant regulatory and operational breakthrough, addressing evolving investor preferences and industry efficiency while paving the way for a new era in investment fund structuring.
- https://www.planadviser.com/dimensionals-etf-share-classes-get-official-sec-approval/?utm_source=rss-feed&utm_medium=news&utm_campaign=feed – Please view link – unable to able to access data
- https://www.reuters.com/markets/wealth/sec-approves-dimensional-fund-advisors-launch-etf-share-class-13-mutual-funds-2025-11-17/ – The U.S. Securities and Exchange Commission (SEC) has approved Dimensional Fund Advisors (DFA) to introduce an exchange-traded fund (ETF) share class for 13 of its existing mutual funds. This decision marks a significant regulatory milestone, making DFA the first asset manager in over two decades to implement ETF share classes for mutual funds beyond Vanguard, which held a now-expired 20-year patent on the model. DFA submitted its application shortly after that patent expired in 2023, receiving preliminary approval in September 2025. While DFA has authorization for 13 mutual funds, it is expected to roll out the ETF share classes gradually, likely starting in early 2026. Industry advocates, including the Investment Company Institute, emphasize that this move could provide mutual fund investors with lower-cost and more tax-efficient access to investment strategies by consolidating operational costs across share classes. The development is considered a catalyst that may lead to the approval of similar applications by other asset managers seeking a presence in the expanding ETF market.
- https://www.dimensional.com/us-en/insights/dimensional-receives-sec-approval-for-etf-share-classes – Dimensional Fund Advisors, the largest active ETF issuer in the US, has received approval from the US Securities and Exchange Commission (SEC) for exemptive relief to offer exchange-traded fund (ETF) and mutual fund share classes. This approval follows the SEC’s September 29 public notice of its intent to approve Dimensional’s application. Dimensional offers many transparent, diversified, and low-cost funds that may be well suited to the ETF share class structure. Since launching its first systematic active ETFs in 2020, Dimensional has refined its use of ETF custom create and redeem baskets in pursuit of more efficient and flexible rebalancing. These custom baskets can help improve tax efficiency and reduce portfolio transaction costs. With ETF share classes, these benefits can also be shared by mutual fund investors. Shareholders in an ETF share class can benefit from the daily cash flows from shareholders in the mutual fund. Cash flows can be used for portfolio rebalancing while allowing for additional flexibility in the use of custom create and redeem baskets. This flexibility can lower total portfolio transaction costs. ETF share classes also can benefit from the existing broad base of investors in Dimensional’s mutual funds and the benefits of scale that generally come with well-established funds including diversification, reduced expenses, and the potential for increased securities lending. Gerard O’Reilly, Dimensional Co-CEO and Co-CIO, said, “The joining of mutual funds and ETFs through share classes represents a significant enhancement in how millions of Americans can access financial markets in the future. Share classes allow investors to choose the investment strategy that best suits their needs as a first-order consideration, and then select their ideal wrapper to access that strategy, while broadening benefits of increased tax efficiency and reduced costs from scale.”
- https://www.dimensional.com/us-en/newsroom/sec-issues-notice-to-approve-dimensionals-application-to-offer-etf-share-classes – The US Securities and Exchange Commission (SEC) has issued a public notice that it intends to approve Dimensional’s exemptive relief application to offer exchange-traded fund (ETF) and mutual fund share classes. Since filing for exemptive relief in July of 2023, Dimensional, the largest active ETF issuer in the US, has consistently advocated for the benefits that the share class structure could provide both mutual fund-class and ETF-class shareholders. Mutual fund-class shareholders could benefit through lower transaction costs and greater tax efficiency, while ETF-class shareholders could also benefit from more efficient rebalancing using mutual fund cash flows and lower total portfolio transaction costs, among other benefits of scale passed along to both sets of investors. “We are appreciative of the opportunity that this notice of application represents, and grateful for the positive, collaborative interactions we have had with the SEC staff throughout the process,” said Gerard O’Reilly, Dimensional’s Co-CEO and Co-Chief Investment Officer.
- https://www.etf.com/sections/features/sec-opens-door-etf-share-classes-dimensional-first-line – The SEC has signaled it will let Dimensional Fund Advisors add ETF share classes to its mutual funds. In a notice published Monday, the SEC said it intends to grant exemptive relief for Dimensional’s multi-class structure, where a single fund can issue both mutual fund and ETF shares. The move positions Dimensional to become the first asset manager outside Vanguard with the ability to run ETFs and mutual funds side by side in the same portfolio.
- https://www.dimensional.com/us-en/newsroom/dimensional-files-application-for-etf-share-class-exemptive-relief – Dimensional Fund Advisors, the industry’s largest active ETF issuer, filed an application for exemptive relief with the Securities and Exchange Commission (SEC) seeking permission to offer ETF share classes of its US mutual funds, which represent approximately $400 billion in investor assets. In the filing, Dimensional outlines how it believes this structure could benefit mutual fund class and ETF class shareholders. Mutual fund class shareholders could benefit through lower transaction costs and greater tax efficiency. New ETF class shareholders could also benefit from advantages offered by this structure, including more efficient rebalancing using mutual fund cash flows and lower total portfolio transaction costs, among other benefits of scale passed along to investors. “Many advisors and institutions continue to ask for new investment strategies to be efficiently delivered as both mutual funds and ETFs,” said Gerard O’Reilly, Co-CEO and Chief Investment Officer.
- https://www.dimensional.com/us-en/newsroom/dimensional-files-amended-application-for-etf-share-class-exemptive-relief – Dimensional has filed an amended application for exemptive relief to offer ETF share classes following productive conversations with the Securities and Exchange Commission (SEC) staff. The firm has the longest-pending application of more than 50 active applicants for share class relief, which together represent over $15 trillion in mutual fund and ETF assets. Many of the managers that subsequently filed for exemptive relief have followed Dimensional’s application closely, and analysts have noted the firm’s application has become an industry template. At a recent industry conference in March 2025, SEC Acting Chairman Mark Uyeda commented, “More than two years have passed since the most recent set of exemptive applications for ETF share class relief was filed. I have directed Commission staff to prioritize their careful review of the many applications filed for this relief, and I look forward to considering their recommendations.”
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
10
Notes:
The SEC’s approval of Dimensional Fund Advisors’ (DFA) request to offer both ETF and mutual fund share classes within the same fund structure was granted on November 17, 2025. This is the earliest known publication date for this specific development. The narrative is based on a press release from DFA, which typically warrants a high freshness score. There are no indications of recycled content or discrepancies in figures, dates, or quotes. The approval was delayed by the recent U.S. government shutdown but is now official. ([dimensional.com](https://www.dimensional.com/us-en/insights/dimensional-receives-sec-approval-for-etf-share-classes?utm_source=openai)) The report includes updated data and does not recycle older material.
Quotes check
Score:
10
Notes:
The direct quotes from John Russo, national leader of public investment management at KPMG US, and Gerard O’Reilly, co-CEO and co-CIO of Dimensional, are unique to this report. No identical quotes appear in earlier material, indicating potentially original or exclusive content. There are no variations in quote wording, and no online matches were found for these specific quotes.
Source reliability
Score:
10
Notes:
The narrative originates from a reputable organisation, Dimensional Fund Advisors, which is a well-established and credible entity in the investment management industry. The report is published on their official website, further confirming its reliability.
Plausability check
Score:
10
Notes:
The report’s claims are consistent with recent developments in the investment management industry. The SEC’s approval of DFA’s dual share class structure aligns with prior announcements and industry expectations. The narrative includes specific factual anchors, such as the approval date (November 17, 2025), the names of individuals quoted, and the specific funds involved. The language and tone are consistent with typical corporate communications, and there is no excessive or off-topic detail. The tone is formal and professional, resembling typical corporate or official language.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative is fresh, original, and sourced from a reputable organisation. All claims are plausible and supported by specific details. There are no indications of recycled content, unverifiable entities, or lack of coverage. The language and tone are appropriate for the context. Therefore, the overall assessment is a PASS with high confidence.