Dimensional World Equity Fund Review
Endowus recently released their new Fund Smart feature which has been making rounds in the Singapore personal finance space. With its customizability and affordability, it’s no wonder it’s getting so popular!
I’ve decided to try the feature for myself and took a look at the funds available. The Dimensional World Equity Fund stood out to me straight away. With the inclusion of this fund, we will finally be able to use CPF / SRS funds to invest in a world fund.
In this article, I will be taking a deep dive into the Dimensional World Equity fund and give my review and thoughts about it.
This is a relatively young mutual fund which was only incepted in 2018. The fund is denominated in SGD, but the underlying assets are bought in GBP.
For Singapore investors, it is great news! This provides ease of purchase as buyers do not have to convert their currencies and incur any FX fees.
The fund does not track any specific world index. Instead, it aims to provide exposure to all sectors and across all countries to its investors. Compared to the MSCI All Country World Index which has 3,044 holdings, the Dimensional World Equity Fund has a whopping 11,052 holdings.
This provides ample diversification for a solid long term investment plan. Even the VT’s 8,807 holdings could not hold a candle to it.
The minimum sum required to invest in this fund is GBP113,277. However, you can now invest with a much smaller sum due to Endowus Fund Smart!
Domiciled in Ireland
For all your FIRE people out there, it’ll spark joy for you to hear that this fund is domiciled in Ireland. This means that as Singaporean investors, we will only incur a 15% tax withholding for underlying US stock’s dividends.
As an accumulation fund, dividends are not paid out to the investors. Instead, they are immediately reinvested into the underlying assets. For long term investors not looking for income but growth, this is a perfect setup!
The fund’s top 5 holdings are Apple, Microsoft, Amazon, Facebook, and Verizon. This is similar to most World Funds out there as these companies have the largest market caps in the world.
However, what surprised me was the relatively large weightage given to Verizon. It’s neither has the 5th largest market cap nor provides any large growth opportunity. This leads me to question the stock selection and its allocation of the fund.
As it is not public information on how individual stocks are selected, this remains a question mark for me.
Across regions, the main bulk of the holdings (70%) are still in the United States and Europe. There is a small 10% of the holdings that are in emerging markets.
When the US markets do badly, the fund’s performance will likely be greatly impacted as well. If you’re looking to increase your regional diversification, you can consider pairing this fund with another Emerging Market fund.
The fund is very diversified when it comes to sectors.
It comes as no surprise that technology currently weighs the heaviest as compared to other sectors.
Having a well diversified sector allocation will help to mitigate industrial cycle risks. In this regard, I’m quite satisfied with the funds allocations.
The fund comes in at a Total Expense Ratio (TER) of 0.40%. Expense ratio refers to the cost of the fund. In this case, $4 is used to pay the fund managers for every $10,000 invested.
As far as mutual funds go, this is a very low fee. Many mutual funds go upwards of 1% TER.
Of course, compared to the expense ratio of other World ETFs which hovers around 0.08% to 0.25%, the Dimensional World Equity Fund’s TER might seem a lot more expensive.
The reason for the higher expense is because there are actual human fund managers who are picking the underlying stocks and their respective allocations in the fund. ETFs on the other hand usually track an index and have these done automatically.
Comparison to World ETFs
I will expect that most investors will compare this fund to other World ETFs such as IWDA. Given their large similarities, this is an expected comparison.
UCITs ETFs or Mutual Funds are funds that are domiciled in Ireland. The main advantage of these funds is to reduce your withholding tax and estate tax liabilities. BetterSpider has written a great article explaining this in detail.
I have identified 3 UCITs World ETFs that are relevant for comparison. They are IWDA, VWRA and SWRD.
|Dimensional World Equity Fund||IWDA||VWRA||SWRD|
|Fund Type||Mutual Fund||ETF||ETF||ETF|
|Total Expense Ratio (TER)||0.40%||0.20%||0.22%||0.12%|
|Number of holdings||11,052||1,608||3,455||1,600|
|Benchmark Index||Fund Manager||MSCI World Index||FTSE World Index||MSCI World Index|
We can see that out of the options above, Dimensional’s fund is the most expensive in terms of expense ratio. However, it also consists of the most number of underlying holdings.
By buying into the fund, you’re essentially paying more for diversification. Given this, I feel that the additional expense ratio might be worth its cost.
If you’re interested to see a comparison between the different passive ETFs, you can check out Investment Moat’s article on that.
After doing my research and writing this article, I have to say that I am quite impressed with Dimensional’s World Equity Fund. Given its low cost and high diversification, this is a relatively good fund to have for long term investments.
Compared to the World ETF funds, the difference in expense ratio can really add up over time.
This is especially so when your portfolio grows much larger with time. If possible, I will still recommend buying World ETFs over Dimensional’s World Equity Fund.
With the introduction of Endowus Fund Smart, you can now use your CPF-IS or SRS funds to invest in the Dimensional Fund. There is, however, no way to purchase World ETFs such as IWDA using your CPF funds right now.
Therefore, my recommendation right now will be to use cash to purchase World ETFs and CPF-IS/SRS to purchase Dimensional Fund through Endowus.
I hope that this review of the Dimensional World Equity Fund can help you in picking out your Fund Smart allocations.
Are you looking for other Robo-Advisors to help automate your retirement investments? Check out my review of StashAway here! I’m currently using it to construct a well-diversified retirement portfolio.
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