Being on the institutional investment platform, also gives our clients access to DFA mutual funds. DFA funds are distributed to investors only through approved fee-only advisors. FPL Capital Management has been an approved advisor since 2006. DFA is considered to be one of the top fund families around.
Working years ahead of the industry, Dimensional forged a new way to invest. The firm inaugurated its strategies in 1981 with early research into the stronger performance of small cap stocks. Later, a comprehensive analysis of stock prices worldwide deepened the strategy repertoire and set a new standard for portfolio design. This evolution reflects an abiding belief in financial science and the efficacy of capital markets.
At Dimensional, they see markets as an ally, not an adversary. Rather than trying to take advantage of the ways markets are mistaken, they take advantage of the ways markets are right-the ways they compensate investors. The firm designs portfolios to help their investors capture what the market offers in all its dimensions.
Dimensional is owned primarily by employees and directors, and manages assets exclusively for institutional investors and the clients of registered financial advisors. From offices in Austin, Santa Monica, London, and Sydney, their professional staff supervises portfolios twenty-four hours a day.
As of June 30, 2017 the company has over $518 billion in assets under management.
Dimensional is always researching tomorrow’s solutions today. They do this through deep working relationships with leading financial economists. By acting as a conduit between scientists and practicing investors, Dimensional has pioneered many strategies and consulting technologies now taken for granted in the industry.
Dimensional’s process explores every aspect of dynamic real-world markets, including portfolio architecture, trading methodology, and tax management. Their investment staff is involved in research efforts through its daily trading activities, resulting market studies, and Investment Committee participation. Clients benefit when research and experience combine to solve new investment challenges. As often as a research innovation generates a new technology, a client need or investment problem drives a new solution.
Working years ahead of the industry, Dimensional forged a new way to invest. The firm inaugurated its strategies in 1981 with early research into the stronger performance of small cap stocks. Later, a comprehensive analysis of stock prices worldwide deepened the strategy repertoire and set a new standard for portfolio design. This evolution reflects an abiding belief in financial science and the efficacy of capital markets. At Dimensional, we see markets as an ally, not an adversary. Rather than try to take advantage of the ways markets are mistaken, we take advantage of the ways markets are right—the ways they compensate investors. The firm designs portfolios to capture what the market offers in all its dimensions. Relieve the stress and confusion of investing with a clear and empirical approach to wealth management.
TAKE RISKS WORTH TAKING
Evidence from practicing investors and academics alike points to an undeniable conclusion: Returns come from risk. Gain is rarely accomplished without taking a chance, but not all risks carry a reliable reward. Financial science over the last fifty years has brought us to a powerful understanding of the risks that are worth taking and the risks that are not. Everything we have learned about expected returns in the equity markets can be summarized in three dimensions. The first is that stocks are riskier than bonds and have greater expected returns. Relative performance among stocks is largely driven by the two other dimensions: small vs. large and value vs. growth. Many economists believe small cap and value stocks outperform because the market rationally discounts their prices to reflect underlying risk. The lower prices result in higher returns to investors as compensation for bearing this risk.
Relative performance in fixed income is largely driven by two dimensions: bond maturity and credit quality. Bonds that mature farther in the future are subject to the risk of unexpected changes in interest rates. Bonds with lower credit quality are subject to the risk of default. Extending bond maturities and reducing credit quality increases potential returns. With this understanding, investors can plan the total risk/return profile of their portfolios, considering how much exposure they need to target their performance goals.
For example, investors seeking greater expected returns may increase their equity exposure while keeping their bond portfolio short and high-quality. Alternatively, they may choose to hold bonds with slightly longer maturities and slightly lower credit quality while maintaining their equity allocation. Whatever approach you choose, financial science has clarified the investment process by identifying the relevant dimensions of performance.
STRUCTURE IS THE STRATEGY
Successful investing means not only capturing risks that generate expected return, but reducing risks that do not. Avoidable risks include holding too few securities, betting on countries or industries, following market predictions, and speculating on “information” from rating services. To all these, diversification is the antidote. It washes away the random fortunes of individual stocks and positions your portfolio to capture the returns of broad economic forces. Traditional managers do one of two things: Active managers focus on picking individual stocks, the antithesis of diversification; index managers hold many securities but mimic arbitrary benchmarks. Dimensional chooses a different path. It structures strategies based on scientific evidence rather than on speculation or commercial indexes. The firm diversifies not only in the amount of securities it holds (thousands) but in the range of capital market strategies it explores and develops. Small cap strategies target smaller stocks more consistently. Value strategies target value returns with greater focus. As a result, investors achieve more consistent portfolio structure.
SMART TRADING INCREASES RETURNS
Trading stocks —especially small cap stocks—is expensive. Most managers are only too willing to pay these costs to meet a forecast or follow an index. The costs they generate are buried in financial statements and corporate ledgers, but the investor always pays in the form of lowered returns. Careful trading can reduce or even reverse the costs borne by traditional managers. The savings accrue directly to the investor’s return. Dimensional focuses on trading. Our refusal to forecast or follow indexes gives us negotiating strength. Where others feel compelled to buy and sell, the firm can take its time. Dimensional trades more than 12,000 equity securities per year. It is more important that we capture the systematic performance of broad market dimensions than the random fluctuations of any single security. It is more important that we keep costs low—patiently and expertly. For nearly three decades, Dimensional has developed its trading infrastructure to make this possible. Our state of-the-art desks around the world ensure a formidable presence in financial markets. Such a large scale brings opportunity for cost-effective and lucrative trades. A vast universe of illiquid stocks is transacted in a coordinated way. The result: performance driven by a potent combination of investment philosophy and trading power. A Dimensional investor is not satisfied with traditional definitions of returns. By being patient when others are pushing to transact and by being thrifty when others pay a premium, the firm works daily to improve your results.
PIONEERS IN FINANCIAL ENGINEERING
Dimensional is always researching tomorrow’s solutions today. We do this through deep working relationships with leading financial economists. By acting as a conduit between scientists and practicing investors, Dimensional has pioneered many strategies and consulting technologies now taken for granted in the industry. The firm started with a single micro cap portfolio that helped pioneer small cap investing. Since then, the fund family has grown to include more than a hundred portfolios worldwide. This would seem to be a perplexing number of choices were it not for the consulting technology and investment philosophy that evolved alongside the strategy line. Dimensional’s funds are coordinated by elegant models of risk and return, trial-tested in academic labs, and time-tested in actual portfolios. The result is increased flexibility. A client’s portfolio can target its goals with a wide range of highly engineered vehicles—a range that continues to grow for tomorrow’s needs.
THE NEXT FRONTIER
The latest and perhaps most complete manifestation of Dimensional’s investing paradigm is its core equity strategies. Each core strategy targets stocks across the multiple asset classes of a market. But unlike conventional approaches, the securities are not held in their market-value proportions. The portfolios increase the relative weight of small cap and value stocks where expected returns are greater. Because the architecture is seamlessly integrated and includes a full range of securities, the costs normally associated with maintaining multiple vehicles are greatly reduced. Frictions caused by risks and costs are continually managed in a fully diversified portfolio designed to increase client wealth. Dimensional’s core equity strategies can form the ideal foundation for any modern investment plan.
A PL AN FOR THE FUTURE
The work is never complete. The final chapter will never be written. But a process grounded in science can only improve your financial plan. The peace of mind and clarity of such an approach would be reward enough were it not for its long history of documented performance.
By applying modern financial principles to wealth management, Dimensional remains ahead of the industry, ready to address your future needs. Get involved today. Become a Dimensional investor and bring science to the life of your wealth.