dbonnett wrote:Rick: That type of selling will encourage a lot a short term holding. Is DFA going for growth at all costs? Pump it up and go public or be acquired for one big payday?
As I mentioned, it is unlikely that any of that type of "selling" will take place. If DFA was going for growth at all costs, they would simply offer ETF strategies or be directly available to the public like Vangaurd. Clearly that has never been, and will never be the case.
Rick Ferri wrote:
...more money means less opportunities in the small cap value area.
There should initially be high returns as money pours in, followed by lower returns from afterward, right? ...or have we already seen the high returns?
That means nothing of the sort. It may mean that these advisors will be moving assets from inferior strategies like Russell 2000 Value or S&P 600 Value ETFs to the DFA Targeted Value or Vector strategies, but that is a zero sum transfer. DFA is simply able to target these dimensions more consistently and efficiently than other options, and that won't change. If anything, an even further improvement in the consistency of cash flows will improve the strategies.
US Targeted Value could easily hold 15X the assets it does today, and US Vector could probably reach $100B without a problem. That is many, many decades from now. US Small Value (for those who can still use it
) is also quite lean and has plenty of room to grow.
Finally, there is simply no evidence that SV has experienced a disproportionate run-up since becoming "investable":
Dimensional US Small Value Index 6/27 - 3/93 Annualized return prior to release of DFSVX = +13.0%
DFSVX since inception = +11.3%
And the "SV premium" relative to TSM since DFSVX inception has been almost exactly the size of the Dimensional SV Index premium above CRSP 1-10 going back to 1927, about 3.5% per year. No doubt, this must agitate those investors and advisors who have overweighted TSM based strategies or undereducated their clients on the benefits of meaningful
DFA is a privately held company with several shareholders who may be wondering about an exit strategy. The plan could be to sell, but I really have no idea.
Anyone who knows (almost) anything about DFA knows that they have a strong succession plan in place and their current corporate structure will remain unchanged as the next generation steps forward.
Perhaps the next move will be DFA ETFs? DFA does have indexes now, and they could easily license those indexes to an ETF company such as InvestoPowershares.
DFA has absolutely 0 plans to offer ETFs. Those advisors who want to use pure index ETF strategies have plenty to choose from, iShares and Vanguard the two biggest of course.
DFAs management approach: daily rebalancing with cashflows, momentum considerations and overall patient trading, and block purchase/sale efforts have no place in the mindless world of ETF arbitrary reconstitution.
DFAs indexes were simply developed to provide useful historical simulated results and longer term benchmarking purposes for DFAs funds. Unlike the FF indexes that were used for academic study and ease of calculation/reporting purposes, DFAs indexes are designed to have a more uniform set of calcuation and rebalancing rules that more closely align themselves to the actual funds (its still not perfect, as DFAs real worl management cannot be duplicated in true index form).
That was made perfectly clear when they were rolled out almost 3 years ago. Of course that hasn't prevented those who wish to read much more into it than they should from doing so.