Dimensional Fund Advisors and the Evolution of Passive Investing in Global Equity Markets

In 2025, the global equity landscape has witnessed a notable shift in performance dynamics, with developed markets outside the US outperforming both domestic and emerging markets in the first half of the year. This trend underscores the growing importance of international diversification, a principle that Dimensional Fund Advisors has long championed. According to a report by Dimensional, the dispersion of returns across individual countries has widened, reinforcing the case for broad geographic exposure to mitigate risk and capitalize on regional growth cycles Mind the Gap—Diversifying Across Countries^[1].

Dimensional's strategic initiatives in 2025 reflect a deliberate effort to expand access to global equity markets while adhering to its core philosophy of evidence-based investing. The firm recently launched the Global Core Equity Fund and the Emerging Markets Large Cap Equity Fund in Singapore, offering investors cost-effective, systematic active strategies that blend academic research with market efficiency principles Dimensional brings three systematic active funds to …^[3]. These funds exemplify Dimensional's approach to redefining passive investing, which now incorporates systematic deviations from traditional indexes to target higher expected returns. By overweighting stocks with characteristics such as small size, low price relative to fundamentals, and high profitability, Dimensional aims to capture risk premiums identified through decades of academic study Mind the Gap—Diversifying Across Countries^[1].

The evolution of passive investing itself has blurred the lines between traditional indexing and active management. As noted in Dimensional's insights, the proliferation of thematic ETFs and index funds has enabled investors to engage in market timing—a practice that diverges from the original intent of passive strategies, which emphasized embracing market prices and long-term efficiency Mind the Gap—Diversifying Across Countries^[1]. In contrast, Dimensional's systematic active strategies align more closely with the core tenets of passive investing by relying on academic research to construct portfolios that deviate from market benchmarks in a disciplined, rules-based manner. This approach avoids rigid indexing while maintaining low costs and broad diversification, a balance that has become increasingly critical in an era of volatile market conditions The Most Popular Dimensional ETFs to Buy in 2025^[4].

Dimensional's emphasis on market efficiency is further evident in its ETF lineup, which includes products targeting U.S. small-cap equities, international value stocks, and high-profitability companies. These offerings reflect the firm's belief that prices in public capital markets rapidly incorporate new information, allowing investors to systematically tilt toward stocks with higher expected returns without relying on short-term forecasts Mind the Gap—Diversifying Across Countries^[1]. For instance, the firm's Emerging Markets Large Cap Equity Fund leverages academic insights to navigate the complexities of emerging markets, where inefficiencies can persist but are increasingly arbitraged away by global capital flows Dimensional brings three systematic active funds to …^[3].

For investors, Dimensional's strategies highlight the importance of adapting to a rapidly evolving market environment. As traditional passive investing faces challenges from thematic and ESG-focused funds, Dimensional's hybrid model offers a middle ground—combining the cost advantages of passive strategies with the flexibility of active management grounded in empirical research. This approach is particularly relevant in 2025, where macroeconomic uncertainties and divergent regional growth trajectories have amplified the need for nuanced asset allocation The Most Popular Dimensional ETFs to Buy in 2025^[4].

In conclusion, Dimensional Fund Advisors' strategic positioning in global equity markets underscores its commitment to redefining passive investing through a lens of academic rigor and market efficiency. By expanding access to international equities, leveraging systematic active strategies, and maintaining a disciplined focus on long-term capital appreciation, the firm is well-positioned to navigate the complexities of the 2025 market landscape. For investors seeking to balance diversification, cost efficiency, and evidence-based returns, Dimensional's approach offers a compelling framework for navigating an increasingly fragmented global equity market.