ETFs

Factor-based ETFs provide lower-cost ways to access financial markets,along with the potential for outperformance. Only Manulife Investment Management offers ETFs subadvised by Dimensional Fund Advisors,¹ a pioneer of multifactor investing, backed by over 35 years of financial science.

Factors that matter

The premise is simple: No single investment factor could sufficiently explain the cross section of expected stock returns.

Dimensional, in turn, leverages academic research in their approach to factor-based investing, seeking to identify and isolate those equity characteristics that are true drivers of long-term performance. They’ve identified three factors, also referred to as dimensions: company size, relative price, and profitability.

A closer look at each factor

Company size

The company size dimension reflects the excess return that investors demand for investing in small cap stocks relative to large cap stocks. The premium associated with this is the small cap premium.

Relative price²

Relative price reflects the excess return that investors expect from investing in low relative price, or value, stocks (as measured, for instance, by the price-to-book ratio) versus high relative price, or growth, stocks. The premium associated with this is the value premium.

Profitability³

Profitability provides a way to discern the expected returns of companies with similar price-driven characteristics. For example, if two companies trade at the same relative price, the one with higher profitability should have a higher expected return.The premium associated with this is the profitability premium.

Factors distilled from years of academic research

The multifactor, or multidimensional, approach requires a higher degree of expertise to evaluate and manage the trade-offs between expected returns, risks, and costs; however, this approach increases the likelihood of capturing the premiums associated with each dimension. And history has shown that a multifactor approach tends to yield improved outcomes for investors.⁴

The three bar charts show relative outperformance of three factors. Small stocks tend to outperform large stocks, value stocks tend to outperform growth stocks , and stocks of high profit companies tend to outperform low profit companies.

Taking asset allocation to the next level

In the past, asset allocation was relatively simple for investors—decide how to split money between fixed income and equities and whether to invest in index funds, conventional active funds,or individual securities.

Today, we have the opportunity for more choices:

  • Additional factors that help explain returns in the equity markets
  • How those factors interact with each other
  • How much emphasis to place on each factor

Discover another dimension

Dimensional is a pioneer in multifactor investing and one of the most well-respected money managers in the field today.

Applying academic research to ETF investment solutions

For more than 35 years, Dimensional has been translating compelling academic research into practical, real-world investment solutions. Dimensional has forged deep working relationships with world-leading financial economists and Nobel laureates, including Eugene Fama, Kenneth French, and Robert Merton.⁵

Much of the firm’s approach is based on the groundbreaking academic research of Professors Fama and French, who are also members of the board of directors of the general partner of Dimensional Fund Advisors LP. Professor Fama has been credited as one of the fathers of modern finance and is a Nobel laureate (2013).

How does Dimensional’ s story influence Manulife ETFs?

Lukas Smart, CFA, Senior Portfolio Manager and Vice President, Dimensional Fund Advisors LP

Multifactor investing in practice

The opportunity for vigorous exchange between internal researchers and these lauded academics has allowed Dimensional to bring the ideas of financial science to life for investors.

Dimensional offers investment solutions built on the idea that combining specific factors—borne out by years of rigorous research—can produce better outcomes for investors over the long term.

An approach based on a belief in the markets

The goal: Add value by building portfolios that target higher expected returns in a cost-effective manner.

Dimensional’s strong belief in markets frees the team to think and act differently about investing. Rather than relying on forecasting or trying to outguess others, the firm draws information about expected returns from the market itself, letting the collective knowledge of the market’s millions of buyers and sellers set security prices.

What sets Dimensional apart

In the words of David G. Booth, one of Dimensional’s founders:

In this process, we have the best minds, the people that have developed the research that leads to these conclusions about our dimensions. We’re very comfortable with our process and very pleased with the results we have achieved. The biggest beneficiaries of all this hopefully are the clients.

Dimensional Fund Advisors at a glance6

38 years since founding. 768 billion canadian dollars in global assets under management. 1400 plus employees globally. 13 offices in nine coutries.

Manulife ETFs in Canada

Related materials

1 Dimensional Fund Advisors and Dimensional refer to the Dimensional separate but affiliated entities generally, rather than to one particular entity. Dimensional Fund Advisors Canada ULC is the subadvisor to the Manulife Investment Management ETFs. Neither Dimensional Fund Advisors Canada ULC nor its affiliates are affiliated with Manulife Investment Management or any of its affiliated entities. Dimensional Fund Advisors LP   receives compensation from Manulife Investment Management in connection with licensing rights to the indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no representation as to the advisability of investing in, the Manulife ETFs. Dimensional refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services. Commissions, management fees, and expenses all may be associated with exchange-traded funds (ETFs). Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus. Please read the prospectus before investing. ETFs are not guaranteed, as their values change frequently. Past performance does not guarantee future results. 2 Relative price, as measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. 3 Profitability is a measure of current profitability, based on the information from individuals companies’ income statements. Diversification does not guarantee a profit or eliminate the risk of loss. 4 For illustrative purposes only. Not representative of an actual investment or the indexes tracked by the Manulife Investment Management ETFs in CAD. Actual returns may be lower. It is not possible to invest directly in an index. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. MSCI indexes are gross dividends. S&P data © 2019 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. See “Index descriptions” in the appendix for descriptions of Dimensional and Fama/French index data. Eugene Fama and Kenneth French are members of the board of directors of the general partner of, and provide consulting services to, Dimensional Fund Advisors LP. Past performance does not guarantee future results. 5 Eugene Fama and Kenneth French are members of the board of directors of the general partner of, and provide consulting services to, an affiliate of Dimensional Fund Advisors Canada ULC. Robert Merton provides consulting services to an affiliate of Dimensional Fund Advisors Canada ULC. 6 Dimensional Fund Advisors LP was founded in 1981. Global AUM and number of employees are as of June 30, 2019. Locations with offices operated by Dimensional. Dimensional refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte.  Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

Commissions, management fees, and expenses may all be associated with exchange-traded funds (ETFs).

Investment objectives, risks, fees, expenses, and other important information are in the ETF facts as well as the prospectus, please read the prospectus before investing.

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