Dimensional UMAs: More Value Through Integrated Management

With a Dimensional unified managed account (UMA), advisors can combine different investment vehicles in one personalized account for each of their clients—and look to Dimensional for daily portfolio management. Our UMA Platform enables advisors to build portfolios with a Dimensional direct-security separately managed account (SMA) sleeve, Dimensional exchange-traded funds and mutual funds, and over 1,500 non-Dimensional ETFs.

While there are many unified managed account offerings out there, a Dimensional UMA has a feature that can unlock additional benefits for investors: Dimensional manages both the UMA at the account level—for ongoing cash management, rebalancing, and tax efficiency—as well as the direct-security SMA sleeve held within the UMA.

Why is this important?

A Dimensional UMA enables investors to combine a Dimensional direct-security SMA sleeve with Dimensional ETFs and mutual funds. A consistent investment approach and strategy design across Dimensional funds and SMAs allows for complementary asset allocations. For example, an investor can combine our SMA US Large Cap Core Equity starting strategy with the Dimensional US Small Cap ETF (DFAS) to build a US marketwide equity portfolio.¹ Our ETFs, mutual funds, and SMAs use the same asset class definitions and are structured to pursue reliable equity premiums—size, value, and profitability—in the same way.

This means that when investors combine them in a Dimensional UMA, they don’t have to worry about inefficiencies, such as overlapping or offsetting exposures, that may occur when combining strategies from multiple asset managers.

Another example of consistency is in our approach to sustainability considerations. An investor can build a sustainability-focused portfolio using our sustainability funds and available customizations for our SMA strategies. The sustainability customizations available for our SMA strategies are designed to align with the sustainability considerations applied in our sustainability funds. This can help investors better understand sustainability considerations across the UMA.

Managing both the UMA at the account level and the SMA sleeve allows us to apply integrated asset management. We have more hands-on control and a more complete understanding of the impact of portfolio management decisions on overall portfolio characteristics than is possible in a multimanager account. Dimensional jointly rebalances across and within account sleeves. For example, dividends received from ETF and mutual fund holdings can be deployed within the SMA sleeve to move it closer to its target exposures, and, likewise, dividends from stocks held in the SMA can be applied to rebalance the ETF and mutual fund sleeves. We can also redeploy cash across sleeves faster than a multimanager account, because we do not have to route cash between managers before it can be put to work in the market.

Dimensional applies integrated tax management across and within account sleeves according to the selected level of tax management² for the account. For example, we can use losses realized in one sleeve to offset gains realized in another, including the SMA. And when applying proceeds from harvesting losses in ETFs and mutual funds held in the account to the SMA sleeve, we don’t just apply the cash pro rata—we can intelligently purchase stocks that maintain the SMA’s focus on the premiums. Because Dimensional does not need to submit funds or transaction requests to another firm managing a sleeve of the account, rebalancing transactions can be executed quickly and efficiently.

Dimensional considers both fund and direct-security holdings to provide tax-efficient solutions for cash spending, redemptions, gifting, and gain or loss harvesting. For example, when providing gifting recommendations, we generally expect the best opportunities (in other words, tax lots with the largest long-term capital gains) to be direct-security positions within the SMA, but we also review the tax lots of the ETF and mutual fund sleeves to determine whether there are better opportunities there.

By managing the UMA and the SMA sleeve together, Dimensional enables advisors to provide a sophisticated, highly customizable investment solution for their clients that includes multiple benefits only possible through our integrated management approach.³ These benefits can lead to better outcomes for investors.

Unified managed account (UMA): A portfolio of assets managed by a professional asset manager that can hold multiple types of investments—such as SMA strategies, mutual funds, exchange-traded funds, and individual stocks and bonds—directly owned by the investor.

Separately managed account (SMA): A portfolio of assets managed by a professional asset manager in which the investor directly owns individual securities held in individual accounts.

Direct-security separately managed account sleeve: An SMA strategy held as a sleeve, or position, within a Dimensional UMA. The SMA strategy holds individual securities.

Direct-security holdings: Individual security positions held within an SMA.