DIMENSIONAL FUND STRATEGIES
Overview
Dimensional Fund Strategies are designed to be very low cost, similar to our passive strategies, and aim to outperform benchmarks with broadly-diversified portfolios that overweight high expected return securities and a portfolio management approach that minimizes costly market frictions. Since 1981 Dimensional Fund Advisors has been a well-respected fund investment manager with a track record of applying empirical financial markets research. Several Nobel-prize winning financial economists have served or are currently serving as board directors, thought leaders, or consultants; providing significant influence over the investment methodology. This unique approach to investing has been validated by a long track-record of benchmark-beating performance across asset classes.
Investor Profile
This approach is well-suited for an investor that wants to keep costs low while pursuing long-term outperformance verses benchmarks.
Strategy Objective
The Dimensional Fund Strategies are positioned to provide returns superior to that which would be able to be achieved through a broad mix of low cost index replicating mutual funds covering various investable securities markets. The strategies are positioned to provide alpha from tactical asset allocation and from security selection within funds.
Strategy Characteristics
There will be five Dimensional fund strategies all utilizing DFA mutual funds for the majority of asset allocation. Some of the fixed income allocation is to other mutual funds outside of the DFA family. The strategies are from most aggressive to least aggressive an all equity strategy, an 80/20 strategy (80% equity, 20% fixed income) strategy, a 60/40 strategy, a 60/40 tax efficient strategy, and a 30/70 strategy. Tactical asset allocation between funds will be utilized to generate alpha.
These strategies will also attempt to generate alpha through security selection. Dimensional funds do not perform fundamental security research in hopes of discovering undervalued securities to put into the funds. Instead, Dimensional bases security selection on several factors that historically have led to superior performance. Two such factors for equities are a small cap bias and a value bias. Dimensional equity funds will tend to have a higher weighting to those asset classes. Two important factors for fixed income are term premiums and credit spreads and the funds will alter allocations based on what those levels are.
These strategies will also attempt to generate alpha through security selection. Dimensional funds do not perform fundamental security research in hopes of discovering undervalued securities to put into the funds. Instead, Dimensional bases security selection on several factors that historically have led to superior performance. Two such factors for equities are a small cap bias and a value bias. Dimensional equity funds will tend to have a higher weighting to those asset classes. Two important factors for fixed income are term premiums and credit spreads and the funds will alter allocations based on what those levels are.
Strategy Process
We choose what funds to use in each of the five strategies. Dimensional will review our selections and provide feedback if we ask them. The relationship with Dimensional Fund Advisors is a collaborative one. Dimensional believes its own success is tied to the success of the advisors who use its funds and is there to help in any way it can. Dimensional provides lots of research to support the construction of portfolios. The financial advisors of Waterfront attended a two day seminar at DFA’s headquarters to develop additional knowledge on the best processes to implement when utilizing Dimensional funds.
As with the other strategies, we do implement tactical asset allocation. Those decisions are based on our own input, input provided by third parties and in this case Dimensional. Dimensional is not just a partner at the outset but a continuing partner providing input on what funds may or may not make sense in our portfolio construct.
As with the other strategies, we do implement tactical asset allocation. Those decisions are based on our own input, input provided by third parties and in this case Dimensional. Dimensional is not just a partner at the outset but a continuing partner providing input on what funds may or may not make sense in our portfolio construct.
Want to know more about Fund Strategies?
*The investment(s) discussed may not be suitable for all investors. Investors should make investment decisions based on their own specific investment objectives and financial circumstances.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.