The Dimensional International Core Equity Market ETF (NYSEARCA:DFAI) experienced a remarkable increase of 31% over the past year, reflecting a broader recovery in international equity markets. This surge was coupled with a notable dividend increase of 17.5%, raising the payout to $0.93 per share. The fund, with a total asset value of approximately $12 billion, has drawn attention for its substantial concentration in Canadian financial and energy sectors, which account for nearly 30% of its holdings.
Understanding DFAI’s Performance and Strategy
DFAI distinguishes itself by serving as a core holding for investors seeking exposure to developed markets outside the United States. Unlike traditional passive index funds, Dimensional Fund Advisors employs a systematic approach that emphasizes smaller-cap stocks, value characteristics, and companies with higher profitability. The ETF maintains a diverse portfolio of over 3,800 securities, with its largest holding, ASML Holding, representing less than 1% of total assets. This diversification strategy mitigates risks associated with individual stocks while aiming for enhanced long-term returns.
In terms of dividends, DFAI’s $0.93 per share distribution in 2025 contributed roughly 3% to total returns, complementing the impressive price appreciation. The ETF’s geographic allocation heavily favors Canada, particularly in financial and energy sectors, while also holding significant positions in European companies such as Novartis and Banco Bilbao Vizcaya.
Comparative Analysis and Future Outlook
Despite its significant gains, DFAI’s performance slightly trailed behind the Vanguard FTSE Developed Markets ETF (NYSEARCA:VEA), which achieved a return of 36% over the same period. In contrast, the iShares MSCI EAFE ETF reported a 32% return. Over a five-year horizon, DFAI has generated total returns of 66%, outperforming VEA’s 58%, indicating that its factor-based strategy can yield long-term advantages. The fund’s expense ratio of 0.18% remains competitive, particularly when compared to many of its peers, while a portfolio turnover of 5% helps reduce tax implications for investors.
In the latter half of 2025, DFAI demonstrated resilience by surging 12.3% between April and June, followed by another 4.7% increase in August. This pattern suggests that specific catalysts, such as strength in the semiconductor sector and recovery trends in Europe, played a significant role in the fund’s momentum.
Looking ahead to 2026, major investment banks express optimism regarding international equities. According to J.P. Morgan Global Research, there are projections for double-digit gains in developed markets, driven by narrowing earnings growth gaps and a weaker U.S. dollar. Similarly, Goldman Sachs anticipates a global growth rate of 2.8%, indicating favorable conditions for international markets beyond the technology sector.
Yet, DFAI’s concentration in Canadian assets poses a potential risk. With six of its top ten holdings being Canadian financial and energy firms, the fund is susceptible to fluctuations in commodity prices and the overall economic performance of Canada. Additionally, its focus on value and smaller-cap stocks may lead to underperformance during periods when growth stocks dominate the market.
Investors must weigh these trade-offs carefully. While factor investing can yield significant returns, it requires patience and a willingness to endure periods of underperformance. Moreover, international exposure inherently involves currency risks, particularly for U.S. investors, who may experience reduced returns if the U.S. dollar strengthens in 2026.
For those seeking a simpler and potentially less risky alternative, VEA stands out. With an expense ratio of just 0.03%, VEA offers comparable international exposure while eliminating the complexities associated with factor investing. Its larger asset base of $115 billion also ensures superior liquidity.
DFAI remains an appealing option for investors committed to factor investing who can manage the associated risks. However, the heavy concentration in Canadian sectors warrants ongoing scrutiny as market dynamics evolve throughout 2026.
