Dfa Case Essay

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Week 2 Case: Dimensional Fund Advisors, 2002 Yujiao Hou 23904313 Company Background: The Dimensional Fund Advisors was an investment firm that had employed 130 employees and ranked the 96th in size among all investment companies in the U.S. in 2002. It had its head office in California and three other offices in Chicago, London and Sydney. DFA’s business strategies can be categorized into three aspects. Firstly, DFA was an advanced index fund and believed in efficient market theory that no one could constantly beat the market by actively picking stocks. Secondly, it emphasized the ability and capability of skilled traders to add profits to its fund, even in passive investments. Finally, DFA also believed in sound academic research and put academic research into its investment practice. The business strategies that DFA had adopted made it a unique investment company with steady and strong growth in profits in the past decades. Compared to other mutual funds, DFA had its distinctive features. First of all, DFA kept close relationships with outstanding academics through cooperating investment practice and academic research. Then DFA was a passive fund, which had its primary investments in small stocks and value stocks both in U.S. market and international market. Moreover, institutional clients made up the majority of DFA’s business and almost all of its institutional clients were non-for-profit institutions with tax exemptions. Furthermore, DFA provided investment services to individuals through some registered investment advisors (RIAs), which made it a win-win situation where DFA provides RIAs low fees service and educations, in return RIAs brought wealthy clients to DFA and practical problems for DFA to deliver back to further academic research. DFA Investment Approach The cornerstone of the DFA approach is investing based on sound academic research.

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