How Securities Lending Can Enhance Your Funds' Returns
When we discussed some factors to consider for the DFA versus Vanguard debate, I mentioned that DFA has historically improved returns through securities lending.
Securities lending is a process by which mutual funds and large investors temporarily lend securities they hold to other investors seeking to borrow them. The lenders of the securities receive a fee for this service. Mutual fund companies like DFA and Vanguard lend securities to add some returns to the portfolio.
I thought the following would be a helpful illustration. Below are the revenues generated due to securities lending by DFA and Vanguard. (The improvements are measured in basis points.)
Stock Market Funds
DFA US Core Equity 1 (DFEOX) -- 17.3 bps
DFA US Core Equity 2 (DFQTX) -- 19.8 bps
DFA TA US Core Equity 2 (DFTCX) -- 16.3 bps
DFA US Vector Equity (DFVEX) -- 27.3 bps
DFA Tax-Managed US Equity (DTMEX) -- 14.8 bps
Vanguard Total Stock Market Index (VTSMX) -- 7.4 bps
Vanguard Total Stock Market ETF (VTI) -- 7.4 bps
Large-Cap Funds
DFA US Large Company (DFUSX) -- 12.2 bps
Vanguard 500 Index (VFINX) -- 6.8 bps
Vanguard Large Cap Index (VLACX) -- 0.7 bps
Large-Cap Value Funds
DFA US Large Cap Value (DFLVX) -- 20.3 bps
Vanguard Value Index (VIVAX) -- 10.0 bps
Small-Cap Funds
DFA US Small Cap (DFSTX) -- 32.8 bps
DFA Tax-Managed US Small Cap (DFTSX) -- 37.8 bps
DFA Micro Cap (DFSCX) -- 33.8 bps
Vanguard Small Cap Index (NAESX) -- 15.3 bps
Vanguard Small Cap ETF (VB) -- 15.3 bps
Small-Cap Value Funds
DFA US Small Cap Value (DFSVX) -- 20.5 bps
DFA US Targeted Value (DFFVX) -- 25.0 bps
DFA Tax-Managed US Targeted Value (DTMVX) -- 19.9 bps
Vanguard Small Cap Value Index (VISVX) -- 9.2 bps
Vanguard Small Cap Value ETF (VBR) -- 9.2 bps
Real Estate Funds
DFA Real Estate Securities (DFREX) -- 24.7 bps
Vanguard REIT Index (VGSIX) -- 2.6 bps
Vanguard REIT ETF (VNQ) -- 2.6 bps
International Large-Cap or Market Funds
DFA International Core Equity (DFIEX) -- 28.0 bps
DFA International Vector Equity (DFVQX) -- 22.8 bps
DFA Large Cap International (DFALX) -- 22.0 bps
Vanguard Total International Stock Index (VGTSX) -- 8.0 bps
International Large-Cap Value Funds
DFA International Value (DFIVX) -- 26.0 bps
DFA Tax-Managed International Value (DTMIX) -- 10.3 bps
Vanguard International Value (VTRIX) -- 15.3 bps
International Small-Cap and Small-Cap Value Funds
DFA International Small Company (DFISX) -- 39.2 bps
DFA International Small Cap Value (DISVX) -- 26.5 bps
Vanguard International Explorer (VINEX) -- 7.5 bps
Emerging Markets Funds
DFA Emerging Markets Core Equity (DFCEX) -- 22.9 bps
DFA Emerging Markets (DFEMX) -- 19.7 bps
DFA Emerging Markets Value (DFEVX) -- 23.5 bps
DFA Emerging Markets Small Cap (DEMSX) -- 27.4 bps
Vanguard Emerging Markets Stock Inv. (VEIEX) -- 13.8 bps
Vanguard Emerging Markets ETF (VWO) -- 13.8 bps