Our Fund Partner – DFA

Dimensional Fund Advisors‘ (DFA) institutional mutual funds are only available to individual investors through fee-only Registered Investment Advisors (RIAs). DFA does not make their funds available through brokerage firms. DFA’s philosophy of passive investment and low fund expenses defines this arrangement. DFA seeks to minimize the flow of “hot money” into and out of the funds, which can add significantly to expenses or require the liquidation of positions that generate unwanted capital gains distributions.

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DFA does not develop or recommend investor portfolios. Instead, this work is left up to Madden Funds Management as the advisor to the portfolio. Development of highly efficient portfolios models requires a thorough understanding of the principles of Modern Portfolio Theory (MPT). The principal goal of MPT is to achieve the greatest return for amount of risk taken (or, conversely, to minimize the risk in a portfolio targeted to achieve a specific return). Doing so requires combining asset classes in the portfolio using DFA’s structured asset class funds to achieve effective diversification. Global diversification of the portfolio cushions portfolios during downturns in any single asset class, domestic or foreign. Each Madden managed portfolio typically has allocations to several DFA equity funds that, in aggregate, contain securities of more than 10,000 companies in 50 countries.

As of early 2013, DFA is ranked as the twelfth largest mutual fund family based on total assets, ahead of such familiar names as Janus, American Century, Hartford, Putnam, John Hancock, JPMorgan, and Ameriprise (River Source). Although highly respected in the academic and financial communities, most individual investors have never heard of DFA because the firm does no advertising. This helps keep fund expense ratios very low.