Does DFA emerging markets (DFEMX) have any special sauce?
In other words, do any Bogleeheads believe it would be worth buying at an ER of 0.57 (institutional class) rather than a cheaper index fund such as Fidelity Spartan emerging markets index (FPMAX) at an ER of 0.2 ?
Both are inside a 403b.
Thanks for any discussion.
Does DFA emerging markets have any special sauce?
Re: Does DFA emerging markets have any special sauce?
Strange you ask that, b/c I was wondering the same thing (although I figured the answer may well be 'no')....
I too have been looking into lists available for 403b and 457, also Roth 403b, and there's a long, varied list of funds including DFA, Cox and Dodge, etc. etc. etc. and I too noticed large ER's for many funds. But then I'm used to looking at .07 or so ER's before I started looking at those 403 lists.
I too have been looking into lists available for 403b and 457, also Roth 403b, and there's a long, varied list of funds including DFA, Cox and Dodge, etc. etc. etc. and I too noticed large ER's for many funds. But then I'm used to looking at .07 or so ER's before I started looking at those 403 lists.
Re: Does DFA emerging markets have any special sauce?
I wouldn't bother. They would have to beat it by 0.4% a year to even make it worth bothering with. And they probably won't.
Re: Does DFA emerging markets have any special sauce?
I like the "edge" that I get from DFEVX (DFA em value). If I were you, depending on options available to you, I would go with FPMAX (.20% ER), or with another new very low expense IM fund, which is "cap weighted" and includes some small-caps: IEMG (iShares EM Core) (.18% ER). Truth in advertising: I own DFEVX in my tax deferred account and IEMG in my taxable.
Re: Does DFA emerging markets have any special sauce?
Historically they have beaten the index after ER when looking at 5/10/15/20 year periods. You don't want to pay an advisor .25% to get access to the fund however.Calm Man wrote:I wouldn't bother. They would have to beat it by 0.4% a year to even make it worth bothering with. And they probably won't.
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Re: Does DFA emerging markets have any special sauce?
As a tilter, I've struggled with maintaining my desired AA, the realities of my 40X(X) options, and the keeping costs low.
When comparing funds I use a method inspired by bertson in "Tilters: how much would you pay for a tilt?":
(1) Look up the FF factor regression (portfoliovisualizer)
(2) Multiple the results by the historical premium of their respective factors (Historical and Expected Returns]Historical Returns)*
(3) Subtract the results of the two funds
(4) Subtract the difference in ER
(5) Divide by 4 **
(6) If >0, use the fund. If <0, don't use the fund.
*Yes, I use US Historical Returns because I don't trust EM historical data, the global markets correlations are converging, and US have the best reported data sets.
**This builds wiggle room for negating events, such arbitrage, and the a level of confidence higher returns over the market noise. This step eliminates many funds, but I want large margin of error built into my predictions before I'm willing to pay more because costs matter. Thus, this is a conservative approach.
Here's step 1:
Step 2: Using the assumptions of Market gives historical returns of 11.8, small premium of 2.2, and value premium in large cap of 4.1:
DFEMX = 13.8, FPMAX = 13.0
Step 3: 0.87 in favor of DFEMX
Step 4: 0.87/4 = 0.22
Step 5: 0.22 - (0.57-0.2) = -0.15
(only reported 2 digits)
Step 6: I find DFEMX too expensive and would stick with FPMAX.
When comparing funds I use a method inspired by bertson in "Tilters: how much would you pay for a tilt?":
So, here's how I answer the question:berntson wrote:Here is how I think about things. My current target is to have a portfolio with .3 hml and .2 smb. In the US, a portfolio with this sort of tilt has historically resulted in about 200 basis points of annualized outperformance. I figure that there is roughly a 50% chance of things going well. If things go well, I expect to get roughly the historic outperformance (could be higher, could be lower, but the expectation value is the historic value). I figure there is also a 50% chance that things go badly and I get nothing. In which case, I will be out the extra costs of tilting.
(1) Look up the FF factor regression (portfoliovisualizer)
(2) Multiple the results by the historical premium of their respective factors (Historical and Expected Returns]Historical Returns)*
(3) Subtract the results of the two funds
(4) Subtract the difference in ER
(5) Divide by 4 **
(6) If >0, use the fund. If <0, don't use the fund.
*Yes, I use US Historical Returns because I don't trust EM historical data, the global markets correlations are converging, and US have the best reported data sets.
**This builds wiggle room for negating events, such arbitrage, and the a level of confidence higher returns over the market noise. This step eliminates many funds, but I want large margin of error built into my predictions before I'm willing to pay more because costs matter. Thus, this is a conservative approach.
Here's step 1:
Code: Select all
DFEMX, FPMAX
Market 1.12,1.14
Size 0.17, -0.11
Value 0.10, 0.32
Alpha -0.16%, -1.55%
DFEMX = 13.8, FPMAX = 13.0
Step 3: 0.87 in favor of DFEMX
Step 4: 0.87/4 = 0.22
Step 5: 0.22 - (0.57-0.2) = -0.15
(only reported 2 digits)
Step 6: I find DFEMX too expensive and would stick with FPMAX.
Re: Does DFA emerging markets have any special sauce?
Thank you Freddie. So the advisor adds a minimum of 0.25% more so it needs 0.65% outperformance. But assuming it is a taxable account, I believe those funds are somewhat less or a lot less tax efficient. But my bias against DFA funds is obvious.freddie wrote:Historically they have beaten the index after ER when looking at 5/10/15/20 year periods. You don't want to pay an advisor .25% to get access to the fund however.Calm Man wrote:I wouldn't bother. They would have to beat it by 0.4% a year to even make it worth bothering with. And they probably won't.
Re: Does DFA emerging markets have any special sauce?
Thank you all for your comments. To clarify: this is in 403b, so no tax. Also no advisor fees. Total fees are as stated in OP.
Thanks!
Thanks!