Dimensional Fund Advisors

A Banner Year for Dimensional Fund Advisors

Dimensional Fund Advisors

According to Morningstar’s most recent monthly U.S. Open-End Asset Flows Update, 2013 is shaping up to be DFA’s strongest year ever in terms of net cash flows. As of November 30th, DFA’s one-year inflows were $21.2 billion, of which $2.6 billion came from November alone. Note that November is the first full month after the announcement of Eugene Fama winning the 2013 Nobel Prize in economics. Eugene Fama and Ken French have provided the academic foundation for the design of Dimensional's passive investment strategy.

As you can see in the first chart below, in terms of net flows, DFA was second only to Vanguard, which brought in $65.3 billion for the 12-month period ending November 30, 2013. You can see in the second chart, when cash flows are scaled as a percentage of assets under management, DFA had the highest of the ten fund families and dwarfs Vanguard by a three-to-one ratio.

 

One interesting aspect of DFA’s inflows is that they have been particularly high for international equity and bond funds. Since DFA funds are owned primarily by institutions and individuals who are working with a DFA-approved advisor, this makes perfect sense because rebalancing buys and investment of cash deposits normally go into the asset classes that have had the least amount of recent appreciation. This is the opposite of performance-chasing that is a plague on many investors.

American Funds and PIMCO continue to bleed cash, having net outflows of $15.7 billion and $20.0 billion for year-to-date 11/30/2013, respectively. We recently analyzed the performance of American Funds here and PIMCO funds here.

As you have probably surmised, the larger story here is the continued ascendancy of passive over active.  We have covered this topic in several articles such as this one. If we are indeed at the tipping point between passive and active, we at IFA would like to think that we played a role in getting there. We do know that many investors have benefitted from the wealth of information provided on our Website, even if they did not ultimately become clients.

If you would like to learn more about the benefits of a fiduciary wealth advisor and a passive approach to investing, please call us at 888-643-3133.