Dimensional Fund Advisors
From Wikipedia, the free encyclopedia
Dimensional Fund Advisors is an investment firm that develops mutual funds grounded in academic research. The company was founded in 1981 by David Booth and Rex Sinquefield, both M.B.A. graduates of the University of Chicago, where fundamental research informing the firm was first developed by Professor Eugene Fama and Professor Kenneth French of Dartmouth College. See also: Efficient market hypothesis.
The company is headquartered in Santa Monica, California, with regional offices in Sydney, London, Vancouver, Austin, and Chicago. The company is owned by its employees, board members and 28 outside investors, including Gov. Arnold Schwarzenegger. Dimensional boasts Nobel laureates Myron Scholes and Robert C. Merton as two of the seven board members. The late Merton Miller has also served as a director.
Dimensional manages over 100 billion dollars of funds as of 2006. The funds are not offered to the public directly, but only to institutional investors and registered investment advisers.
Dimensional Fund Advisors strives to deliver the performance of capital markets and add value through portfolio design and trading. The firm departs from the rules and rigidity of traditional index funds and avoids the cost-generating activity of stock picking and market timing. Instead DFA focuses on the dimensions of capital markets that reward investors and they deliver them as intelligently and effectively as possible. Financial science has documented that, over the long term, small cap stocks outperform large cap stocks and value stocks outperform growth stocks. These returns seem to be compensation for risk. In fixed income, risk is well described by bond maturity and credit quality. Dimensional's investment strategies deliberately target specific risk factors. They are highly diversified and painstakingly designed to work together in a total index portfolio.
