DFA Funds

Mar 1, 2008 4:15 am

Anyone use/been approved? What is process to be approved to use, aside from “fee only” status?

Mar 1, 2008 12:52 pm

I believe that you need to attend one of their classes, also. It’s something that reinforces their theories and thoughts concerning portfolio management and the active/passive debate.



I think the classes are a few days long.



C

Mar 1, 2008 4:53 pm

Really?  My b/d just sent out a mass mailing saying we signed an agreement to sell DFA in a wrap program.  Is this something different?  It did not mention anything about being “fee ONLY” or any classes.

Maybe we are using an intermediary?  I have not looked closely, and have never used them.
Mar 1, 2008 5:59 pm

Funny stuff… When I talked to them in the past, they told me that they didn’t even work with advisors that maintained a BD relationship, let alone the BD itself. This is from their website…



‘As a result, Dimensional fund shares are not available directly to individuals but are limited to clients of a select group of fee-only financial advisory firms.’



‘Fee only’, is what I read. If they’ve now mass marketed their funds through other non-fee only sources, I’d think they would have watered down their product. Additionally, they seem to think that they are something special, and since they are now on other platforms, DFA advisors will have something to complain about, I’d imagine.



Which BD are you referring to?



C

Mar 1, 2008 6:45 pm

ok, now that i look closer it is not “direct” with DFA.  it is through Beacon Capital:

 

Beacon Capital is excited about our new relationship with the XXXXXXXXX offering Dimensional Fund Advisors in five risk tolerant models. Our wrap fee program includes all transaction and custodial costs and is tiered at 55 bps up to $500, 000, 35 bps on the next $500,000 and 15 bps over $1M.  The advisor can add up to 125 bps not to exceed 1.80 combined program/advisor fee and is paid monthly. Advisors and clients will have daily online access to their accounts. You can visit us on our website at www.beaconinvesting.com and simply click onto “advisor forms” and you will have access to all of our applications, articles and literature. <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

 

I have attached the Beacon strategy sheets that show yearly returns (reported net of the highest combined program/advisor fee of 1.80%), an advisor article on DFA vs. Vanguard and a Morningstar reprint for your review. Please contact me for literature or to answer any questions you may have.

Mar 1, 2008 6:46 pm

Looks like we are talking apples to oranges?

Mar 1, 2008 7:01 pm

Beacon Capital is simply one of a number of fee-only firms making DFA funds available to non-approved firms.  It looks like Beacon Capital is the wrap manager on your b/d (and other) platforms.  Their wrap models use DFA funds.

So you/your clients can “get access” to them via a wrap program, which means in addition to the client paying the normal DFA internal expenses they also have a wrap program sponsor (Beacon) fee tacked on, as well as your fee.

Beacon Capital is the only one interacting directly with DFA, and they would have had to jump through the various ‘qualifying’ hoops Captain correctly mentioned, including the required training sessions.

Mar 1, 2008 7:13 pm

right, which is why i did not think we were comparing apples to apples.  accessing them this way adds another layer (or 2) of expenses on top.

   
Mar 3, 2008 10:41 pm

I use DFA through LPL.

 The reason LPL can use DFA to my understanding is someone use to work for LPL and then joined DFA when he got there he explained how LPL is different from other (indy) BD's so DFA lets LPL reps who go through there training use them! My expense ratio is what you see on morningstar! I do not know if I would use them if a middle man was taking from the pie!
Mar 13, 2008 7:16 pm

Seems to me like they are the classic “you will want this really bad because only certain people can get it”.

  Brokers are stupid sometimes.  I would never put all of my assets with one company.  I know brokers who are doing this because they can charge clients the same fee--but put more in their pocket.
Mar 14, 2008 1:40 am

many are “passive” pioneers, so it’s not exactly a huge bet to use them. also, if other competitors are not DFA approved, can’t hurt to have a diff story without going “active”

Mar 14, 2008 1:58 pm

[quote=iceco1d] That, or some of the biggest names in academic finance and research are founders of, associated with, or employed, by DFA.  Some of the concepts plastered all over the glossy brochures you get get from your wholesalers were “fathered” by some of those gentlemen; I for one have great respect for many of them. [/quote]
Careful in placing too much emphasis on academic prowess, ice.  A number of these geniuses were also board members with Long Term Capital Management, one of the most spectacular investment failures of modern time.

If IQ and investment results were highly correlated, why are there so few wealthy geniuses?

Mar 15, 2008 1:18 pm
Morphius:

[quote=iceco1d]   A number of these geniuses were also board members with Long Term Capital Management, one of the most spectacular investment failures of modern time.

  Maybe they are looking at hiring some folks from Bear Stearns also.
Mar 15, 2008 1:48 pm

I think Pin may have just been trying to be funny, as opposed to taking a shot at you ice.

As for which guys at DFA were involved in LTCM, both the giants you mentioned were indeed involved as board members:

Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics. Initially enormously successful with annualized returns of over 40% in its first years, in 1998
it lost $4.6 billion in less than four months and became a prominent
example of the risk potential in the hedge fund industry. The fund
folded in early 2000.

Mar 16, 2008 12:44 am

Not a shot at you Ice just making light of the current market (God knows we need to try and find a smile somewhere in this mess), corporate greed, what goes around comes around, and sometimes the “Smartest Guys in the Room” (excellent documentary by the way) come falling hard down to earth…besides I am sure there are some Bear guys looking right now.  

Mar 17, 2008 11:08 pm

[quote=iceco1d]Well then, I stand corrected.  My apologies!  I still have a great deal of respect for some of those guys (Scholes, Merton, Rolle, etc.); I guess I’m a bit of a dork sometimes!  [/quote]
As economists, one could certainly argue they have earned some respect (at least as much as economists warrant ). 

It’s an entirely different skill set to actually manage people’s money.  They didn’t win their Nobel Prize for managing money - they won it for their academic contributions to economic theory. 

Mar 18, 2008 12:11 am

I think it makes sense to have a part of someone’s portfolio managed passively & a part managed actively. For the the passive component I usually use strategy UIT’s & DFA doesn’t come close.



It doesn’t come close to my actively managed wrap program’s performance either.



All you Indy’s out there - sell 'em, I’ll be glad to transfer them away from you!

Dec 2, 2008 9:32 pm

Anyone still using this stuff?

Dec 5, 2008 2:13 pm

Yeah, I looked recently, and DFA doesn’t exactly look like a bunch of sages.

Unfortunately, these are the times when indexers get crushed.   U.S. Large Cap Value down 46.5% Small Cap down 42% Most Int'l Funds down 50% minimum   So much for managing risk.  Yikes.
Dec 10, 2008 4:31 pm

One of the founders of the Company, I think his name is David(?) Booth, just gave $300,000,000 to the UofChicago B School, so they have now named the school after him.

  As to portfolio mgt. they were an early pioneer in designing indexed funds, they now have about 90 or so offerings (I could be off on this #). I was told that they will not directly deal w/ RIA's below $20M, but if you have a BD they'll only deal with them, and they have a bunch of conditions for that. One a historic basis portfolios constructed out of DFA funds -- they do not do portfolio construction themselves -- generally experience excess returns of about 1%. It is of course almost impossible to design a true benchmark for a portfolio, and you obviously want such performance measures to be on 'risk-adjusted' basis. 
Dec 10, 2008 4:39 pm

Yeah except the design and that 1% outperformance only worked for a few years, they seem to be lagging everything real bad.

Dec 10, 2008 5:14 pm

I’m still using Symmetry (a portfolio builder of DFA funds). They are doing ok. Through November, their 100% equity portfolio is still beating the S&P (including my 1% fee and the custodian’s .2% fee) for their 5 and 10 year numbers.  The 1 and 3 yr numbers are lagging, but they have never claimed to beat the market in the short term (or in the long term for that matter).

  I just like the way they invest.  I have clients who have been burned this year by Van Kampen, who decided to dump energy stocks about two years ago, and go heavy on financials about a year ago. I'm tired of managers trying to pick which sectors to overweight/underweight, which is why I like Symmetry and DFA. They don't guess based on market factors, they just stay the course.
Dec 10, 2008 7:22 pm

They just got burned by Van Kampen this year??? They have been hanging on for dear life with both hands for a lot of years based off their internet number(Anyone remember VanKampen Strategic Growth??- Fund got so bad they closed it xfered assets to another fund and renamed that one too.)

  Why not look into UITs(not van kampens, try first trust). Essentially they are little quant strategies.  
Dec 13, 2008 9:29 pm

The thing about DFA, is that they expect you to push the Buy & Hold strategy, which is certainly working well in this market…if you’re looking for more losses. I got the impression that if there were too many redemptions by me, the RIA, that they’d unapprove me for their funds. - Based on that attitude, I decided to not pursue getting approved to sell their funds. - Maybe they should have sent the kool-ade to me chlled!

Jan 12, 2009 6:00 pm

Any opinions on DFA’s new tax aware core funds (TA US Core Equity Portfolio DFTCX) and (TA World ex US Core Equity Portfolio DFTWX). Apparently DFA considers these there best and most efficiently designed products.



Jan 12, 2009 6:28 pm
Harry:

Any opinions on DFA’s new tax aware core funds (TA US Core Equity Portfolio DFTCX) and (TA World ex US Core Equity Portfolio DFTWX). Apparently DFA considers these there best and most efficiently designed products.

  DFA blows.
Jan 12, 2009 6:50 pm

Snaggletooth:



Interesting response…Is that all you’ve got or can you back up your opinion with actual facts?



Jan 12, 2009 8:20 pm
Harry:

Snaggletooth:

Interesting response…Is that all you’ve got or can you back up your opinion with actual facts?

  Yes, I can back it up with several factual points based on research.  But it would be a waste of my time to do it.  I'm sure you can figure it out though.
Jan 13, 2009 1:20 am

Snaggletooth



Well now. My first day on this forum and I come across a senior member who calls himself “snaggletooth” He claims that “DFA Blows”, hold on…it gets better. He than claims he can back up his statement with facts but he doesn’t want to because it would be a waist of his time. Let me guess, Mr. snaggletooth is an advisor that was not approved for access to DFA funds and is now on a mission to disparage one of the most highly regarded mutual fund families in existence. Of course he could defend himself by posting the facts he claims to have, but something tells me that he wont.

Jan 13, 2009 1:27 am

Being "approved" to sell a particular investment or "invited" to invest doesn't seem to carry the same weight as it used to.  Thanks Bernie.

Jan 13, 2009 1:42 am

I hope you are not serious regarding the “most highly regarded mutual fund family”… This stuff is terrible… nice idea, worked for a bit, terrible now… The guys who headed this fund company screwed up somewhere else(Hedge fund or something) DFA was the most overrated stuff ever…

Jan 13, 2009 3:33 am

[quote=Squash1]I hope you are not serious regarding the “most highly regarded mutual fund family”… This stuff is terrible… nice idea, worked for a bit, terrible now… The guys who headed this fund company screwed up somewhere else(Hedge fund or something) DFA was the most overrated stuff ever…[/quote]
Do your homework.  Google "Long Term capital Management."

http://en.wikipedia.org/wiki/Long-Term_Capital_Management

This was a failure of unprecedented proportions (at the time - pre TARP).  Check out the principals & board members of LTCM & the principals/board members of DFA.  Many of the same “geniuses,”  with their Nobel Prizes and all.  They thought their sh*t didn’t stink back then; they think the same thing now. Geniuses?

“Approved” to sell their funds?!  “Approved!?!”  That’s sort of like the politicians saying they “approved” this message.  So bleeping what?!  Wake up, sheeple!

Fool me once, shame on you.  Fool me twice, shame on me.

Jan 13, 2009 4:17 am
Harry:

Snaggletooth

Well now. My first day on this forum and I come across a senior member who calls himself “snaggletooth” He claims that “DFA Blows”, hold on…it gets better. He than claims he can back up his statement with facts but he doesn’t want to because it would be a waist of his time. Let me guess, Mr. snaggletooth is an advisor that was not approved for access to DFA funds and is now on a mission to disparage one of the most highly regarded mutual fund families in existence. Of course he could defend himself by posting the facts he claims to have, but something tells me that he wont.

  You are so wrong.  I wouldn't touch DFA funds with a 10 foot pole.  What makes you think they are "one of the most highly regarded mutual fund families in existence"?  That statement was laughable at best.
Jan 14, 2009 12:23 am

Long Term Capitol Management was a highly leveraged hedge fund that used trading strategy that bare no similarity what so ever to any DFA funds especially the Core funds referenced earlier.



But hay…you don’t to drink the Kool-Aid or agree with financial experts on the caliber of William J. Bernstein who believes that DFA will deliver the performance of capital markets and increase returns through state-of-the-art portfolio design and trading.



Ok…so how do you invest? How do you and the others on this forum capture or beat the market’s returns. Are you stock pickers, active traders, use ETF’s or low cost Vanguard Funds?



Jan 14, 2009 12:56 am
Harry:


Ok…so how do you invest? How do you and the others on this forum capture or beat the market’s returns. Are you stock pickers, active traders, use ETF’s or low cost Vanguard Funds?

  Since when does everyone have to beat the market?  Maybe some of us get paid not to beat the market, but to have a plan for whatever the market does.
Jan 14, 2009 1:33 am

[quote=Harry]Long Term Capitol Management was a highly leveraged hedge fund that used trading strategy that bare no similarity what so ever to any DFA funds especially the Core funds referenced earlier.
[/quote]
Oh, that’s entirely different then, is it?  Except that it’s run by the same geniuses that ran LTCM into the ground at 120 mph.  You will probably be first in line to throw your clients’ money at Bernie Madoff when he gets out of jail too, when he sayshe’ll adopt a less “highly leveraged” strategy then, too. 


[quote=Harry]But hay…you don’t to drink the Kool-Aid or agree with financial experts on the caliber of William J. Bernstein who believes that DFA will deliver the performance of capital markets and increase returns through state-of-the-art portfolio design and trading.
[/quote]
The “caliber” of Bernstein?  Still drinking the “financial experts” kool-aid?  What cave have you been living in the last year or so?  If all these smart “experts” say the DFA PhDs can consistently outperform the markets, who are we morons to argue with them?    We are not worthy!!

Have you checked out the DFA perfomance lately, Einstein?  I’m sure all their shareholders who have lost so much money are so relieved to know what William J. Bernstein thinks, or that the people who were losing them money had higher IQs than them. 


Keep your eye on the ball, lad.

Feb 2, 2009 6:14 pm

www.beaconinvesting.com

www.symmetrypartners.com www.loringward.com      
Feb 2, 2009 8:00 pm

Great stuff. Thanks.

Feb 3, 2009 5:34 am

To get an idea of how great the dfa funds work in various allocation models visit www.indexfunds.com - it’s a DFA approved firm (IFA) that lost their clients about 45% last year.  The problem isn’t the funds - it’s the flawed concept of buy and hold.  Using the DFA funds bactested data and selling out each month end that they fall below their 200 day SMA would increase the returns by nearly 2% while decreasing the standard deviation by 1/3.  This can be backtested nearly 75 years with data from the indexfunds.com site.  I think Snaggle is right - maybe they should name a prestigous university after him:

  The Snaggletooth School of Business...I'd enroll!   fyi - this is a compliment snaggle, DFA does blow.
Mar 19, 2009 1:11 am

DFA should be used with and active strategy, if you are at an independent B/D this can be done using 2 a/c’s.

Maybe you blow???

Nov 5, 2010 4:19 pm

I thought this might help some people out I found it on another forum.

http://www.bogleheads.org/forum/viewtopic.php?t=62468&mrr=1288796727

Nov 7, 2010 1:47 am

Let's boil this down.  For those who might be interested in DFA funds, you get to apply to be approved, which includes committing to do a certain amount of your business in DFA funds and taking their several day course at your expense, which gives you the privilege of selling their funds which are average performers at best.  Sounds like a winner to me.