Dimensional Fund Advisors
Encyclopedia
Dimensional Fund Advisors (DFA or Dimensional) is an investment firm headquartered in Austin, Texas
with regional offices in Amsterdam, Berlin, London, Santa Monica, Sydney, and Vancouver. The company was founded in 1981 by David G. Booth
and Rex Sinquefield
, both graduates of the University of Chicago Booth School of Business. The company benchmarks the performance of it's large-cap equity portfolio against the S&P 500 Index, Consumer Price Index, MSCI EAFE Index and the Dow Jones Wilshire 500 Index.
DFA's objective is to "deliver the performance of capital markets and increase returns through state-of-the-art portfolio design and trading." The company's board of directors includes Myron Scholes
who won the Nobel Prize for economics
. The late Merton Miller
, another Nobel laureate, was also on the board of directors, as was Robert C. Merton
before he became the company's Resident Scientist. Other directors include leading economists such as George Constantinides
, Eugene Fama
, Kenneth French
, and Roger G. Ibbotson
. DFA hosts a forum where Eugene Fama
and Kenneth French
express their opinions on topics related to finance and current events. This website is called the Fama/French Forum.
The company rejects stock-picking
and market timing
and utilizes enhanced indexing
to design portfolios and limit trading costs. Their investment philosophy emphasizes five "dimensions" that determine investment results—hence the firm's name. For example, one of their stock funds might overweight small-cap
stocks and value
stocks, to emphasize the dimensions of "size" and "price."
Dimensional has more than $206.35 billion under management . Its mutual funds are not offered directly to the public, but only to institutional investor
s and through approved fee-only Registered Investment Advisor
s. The company is owned by its employees, board members and a number of outside investors, which as of 2005 was reported to include Governor Arnold Schwarzenegger
of California.
On November 6, 2008, the University of Chicago
Graduate School of Business announced a $300 million dollar gift from David Booth in the form of cash and the income stream from DFA stock. The school was renamed the University of Chicago Booth School of Business.
On December 2, 2009, Dimensional announced the acquisition of SmartNest, a retirement planning computer software company. The technology offered by SmartNest was developed by Harvard Business School professor Robert C. Merton
, who left the company's board after the purchase to became Resident Scientist.
Austin, Texas
Austin is the capital city of the U.S. state of :Texas and the seat of Travis County. Located in Central Texas on the eastern edge of the American Southwest, it is the fourth-largest city in Texas and the 14th most populous city in the United States. It was the third-fastest-growing large city in...
with regional offices in Amsterdam, Berlin, London, Santa Monica, Sydney, and Vancouver. The company was founded in 1981 by David G. Booth
David G. Booth
David G. Booth is co-founder and co-CEO of Dimensional Fund Advisors In 2008, he donated $300 million to the University of Chicago Graduate School of Business, which is the largest donation ever given to a business school....
and Rex Sinquefield
Rex Sinquefield
Rex Sinquefield, 62, is a conservative businessman active in Missouri politics and philanthropic causes.-Background:Raised in in Saint Louis, Sinquefield received his MBA from the University of Chicago in 1972, his B.S. in 1967 from St. Louis University, where he is a member of the board of...
, both graduates of the University of Chicago Booth School of Business. The company benchmarks the performance of it's large-cap equity portfolio against the S&P 500 Index, Consumer Price Index, MSCI EAFE Index and the Dow Jones Wilshire 500 Index.
DFA's objective is to "deliver the performance of capital markets and increase returns through state-of-the-art portfolio design and trading." The company's board of directors includes Myron Scholes
Myron Scholes
Myron Samuel Scholes is a Canadian-born American financial economist who is best known as one of the authors of the Black–Scholes equation. In 1997 he was awarded the Nobel Memorial Prize in Economic Sciences for a method to determine the value of derivatives...
who won the Nobel Prize for economics
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
. The late Merton Miller
Merton Miller
Merton Howard Miller was the co-author of the Modigliani-Miller theorem which proposed the irrelevance of debt-equity structure. He shared the Nobel Memorial Prize in Economic Sciences in 1990, along with Harry Markowitz and William Sharpe...
, another Nobel laureate, was also on the board of directors, as was Robert C. Merton
Robert C. Merton
Robert Carhart Merton is an American economist, Nobel laureate in Economics, and professor at the MIT Sloan School of Management.-Biography:...
before he became the company's Resident Scientist. Other directors include leading economists such as George Constantinides
George Constantinides
George M. Constantinides is a financial economist, known for his work on portfolio management, asset pricing, derivatives pricing, and capital markets behavior. He is the Leo Melamed Professor of Finance at the University of Chicago Booth School of Business and a board member of Dimensional Fund...
, Eugene Fama
Eugene Fama
Eugene Francis "Gene" Fama is an American economist, known for his work on portfolio theory and asset pricing, both theoretical and empirical. He is currently Robert R...
, Kenneth French
Kenneth French
Kenneth Ronald "Ken" French is the Carl E. and Catherine M. Heidt Professor of Finance at the Tuck School of Business, Dartmouth College. He has previously been a faculty member at MIT, the Yale School of Management, and the University of Chicago Booth School of Business...
, and Roger G. Ibbotson
Roger G. Ibbotson
Roger G. Ibbotson is professor of finance at Yale School of Management and has written extensively on capital market returns, cost of capital, and international investment. He is the former chairman and founder of Ibbotson Associates, a financial research and information firm that was acquired by...
. DFA hosts a forum where Eugene Fama
Eugene Fama
Eugene Francis "Gene" Fama is an American economist, known for his work on portfolio theory and asset pricing, both theoretical and empirical. He is currently Robert R...
and Kenneth French
Kenneth French
Kenneth Ronald "Ken" French is the Carl E. and Catherine M. Heidt Professor of Finance at the Tuck School of Business, Dartmouth College. He has previously been a faculty member at MIT, the Yale School of Management, and the University of Chicago Booth School of Business...
express their opinions on topics related to finance and current events. This website is called the Fama/French Forum.
The company rejects stock-picking
Active management
Active management refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index...
and market timing
Market timing
Market timing is the strategy of making buy or sell decisions of financial assets by attempting to predict future market price movements. The prediction may be based on an outlook of market or economic conditions resulting from technical or fundamental analysis...
and utilizes enhanced indexing
Enhanced Indexing
In finance, enhanced indexing is a catch-all term that describes strategies employed to outperform traditional indexing. Enhanced indexing attempts to generate modest excess returns compared to index funds and other passive management techniques.-Features:...
to design portfolios and limit trading costs. Their investment philosophy emphasizes five "dimensions" that determine investment results—hence the firm's name. For example, one of their stock funds might overweight small-cap
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
stocks and value
Value investing
Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis...
stocks, to emphasize the dimensions of "size" and "price."
Dimensional has more than $206.35 billion under management . Its mutual funds are not offered directly to the public, but only to institutional investor
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
s and through approved fee-only Registered Investment Advisor
Registered Investment Advisor
The term Registered Investment Adviser is used to describe an Investment Adviser who is registered with the Securities and Exchange Commission or a state's securities agency. The term has been popularized due to its use within the Investment Advisers Act of 1940 and its association to the term...
s. The company is owned by its employees, board members and a number of outside investors, which as of 2005 was reported to include Governor Arnold Schwarzenegger
Arnold Schwarzenegger
Arnold Alois Schwarzenegger is an Austrian-American former professional bodybuilder, actor, businessman, investor, and politician. Schwarzenegger served as the 38th Governor of California from 2003 until 2011....
of California.
On November 6, 2008, the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
Graduate School of Business announced a $300 million dollar gift from David Booth in the form of cash and the income stream from DFA stock. The school was renamed the University of Chicago Booth School of Business.
On December 2, 2009, Dimensional announced the acquisition of SmartNest, a retirement planning computer software company. The technology offered by SmartNest was developed by Harvard Business School professor Robert C. Merton
Robert C. Merton
Robert Carhart Merton is an American economist, Nobel laureate in Economics, and professor at the MIT Sloan School of Management.-Biography:...
, who left the company's board after the purchase to became Resident Scientist.