ฝัง
- เผยแพร่เมื่อ 2 ส.ค. 2024
- You don’t need to be a rocket scientist to work at Dimensional Fund Advisors, but Gerard O’Reilly sees it as an asset, particularly when it comes to problem-solving. Now the Co-CEO and Chief Investment Officer of one of the fastest-growing US investment businesses, Gerard received a Ph.D. in aeronautics before entering fund management, attracted to Dimensional because of the opportunity it afforded him to learn from the world-leading economists at the company; including Eugene Fama, Myron Scholes, Merton Miller, Robert Merton, and Ken French. We recently sat down with Gerard to discuss the firm’s research-based culture and rules-based approach to investing. In this episode, we get into the nitty-gritty regarding Dimensional’s distinctive portfolio management decisions and the data sources they draw from and Gerard answers some technical questions regarding risk assessment, factor tilted portfolios, operating profitability, goodwill, and more. We also touch on the value of combining multiple metrics, why small-cap stocks deserve a place in your portfolio, and some of the biggest changes that Gerard has witnessed in Dimensional portfolios over the past decade, as well as how he applies his scientific learnings to make unique portfolio adjustments and some of the various benefits of Dimensional’s integrated approach. Make sure not to miss this informative, insightful, and in-depth conversation with Dimensional CIO and Co-CEO, Gerard O’Reilly!
Timestamps:
0:00 Intro
4:02 Welcome Gerard O’Reilly
14:20 What criteria do variables need to meet before they are considered dimensions of expected returns in Dimensional’s process?
17:50 At a high level, what sources of information does Dimensional draw from to make portfolio management decisions?
21:53 How does Dimensional decide between under-weighting and entirely excluding securities in portfolios?
24:45 Why does Dimensional use operating profitability?
32:19 How does Dimensional deal with goodwill?
41:34 How does Dimensional deal with internally developed intangibles?
47:04 What do you think about the idea that the world has changed so much since Fama and French’s initial research that their findings are no longer valid?
55:43 How does Dimensional target value and profitability together?
59:26 As Dimensional continues to grow, how do you think about capacity for the investment strategies that own small and micro cap stocks?
1:06:18 How important is security lending revenue to the expected returns of Dimensional funds?
1:12:45 How did Dimensional decide to pursue the credit premium?
1:17:28 What are the biggest changes within Dimensional portfolios over the last 10 years?
1:20:16 What are some smaller changes that people may not have heard about, but are still important?
1:27:30 Do you have any examples of seemingly compelling academic papers that Dimensional Research has assessed and rejected for use in portfolios?
1:30:19 Dimensional only recently started publishing internal research on SSRN where anyone can read it, whereas previously all of that research was behind the advisor login. How was that decision made?
1:33:05 What is the “next big thing” that Dimensional Research is working on?
1:34:47 What do you think is the most difficult part of Dimensional to replicate?
1:39:53 What do people need to be aware of in comparing backtests?
1:42:25 What is something that you have learned from a competitor?
1:45:4 What are the commonalities between aeronautics and asset management?
1:48:45 - ICAPM
Links From Today’s Episode:
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‘Five Things I Know about Investing’- Five Things I Know about Investing | Dimensional Fund Advisors
‘Intangibles Are Noisier than You Think’ - Intangibles Are Noisier than You Think
‘Fundamentally, Momentum is Fundamental Momentum’ - Fundamentally, Momentum is Fundamental Momentum by Robert Novy-Marx :: SSRN - แนวปฏิบัติและการใช้ชีวิต
45:54 is muted momentarily. Pulling from the transcript: "That's our view, you hit it perfectly, Ben. Yep."
Gerard: "I knew you were going to ask that question so I went back and looked through my notes before the podcast." FROM 11 YEARS AGO! What a beast!
This episode is a mini PhD in Finance. Great work and excellent guest!
This is one where I’m definitely having to watch in a focused manner rather than listening while driving a tractor trailer (literally). Great, deep stuff.
This is so good I’m going to have to watch this twice
What I found amazing about this episode is that I didn't really understand most of the questions, but I developed an understanding via Gerard's answers. He has such a great way of quickly setting up some context before answering that makes him such a great communicator. Never mind the portfolio theory stuff, I learned quite a bit on how to communicate complex topics in a way that brings in the listener without too much fluff.
Examples:
* operating profitability - his example demonstrated the volatility difference well.
* goodwill as an asset - the answer is still beyond me a bit, but through his answer I understood the question (through great examples)
* intangible assets (something I can relate to as a software engineer but never thought about it in this way before)
Thanks a lot Ben for your questions at the end regarding ICAPM. Gerard's answers provide a lot a guidance following some implementation questions that arose following the last few episodes. What a well-articulated human being. Another great episode guys.
Wow, fantastic show. I had to stop doing what I was doing to pay attention... and my brain hurt afterward--which I take as a good sign that your content is helping me exercise that muscle. (You feed the engineer in my mind!) Thank you very much.
What happened to the very last question? 'How do you define success? '
Very nice episode, very insightful guest. I have 80% of my portfolio in Dimensional mutual funds (the european ones, but I'd prefer Dimensional ETFs 😉), so this was an interesting listen. Thank you!
Great episode, really intersting
Hi Guys, Just read the piece on the irrelevance of dividends... wouldn't there be an advantage to them while reducing capital base during a falling/down market?
Amazing show! though I had to listen to it twice to get 33% of what was said :)
One important question: as a European (Italian to be precise), are there any Funds comparable to Dimensional here in the Old Continent? I mean in terms of investment philosophy and scientific soundness (...and you know, solid returns wouldn't be bad as well :P).
Thanks and keep up the amazing work, looking forward to episode 200!
There is a massive thread on this at community.rationalreminder.ca/
@@rationalreminder ...and down the rabbit hole I go. Thanks!
@Jacopo I'd advise you to check out iShares core world MSCI etf. Low cost and about 1600 companies in there.
I looked into investing in Dimensional but since most financial advisor charge a hefty premium, I'm sticking with Blackrock iShares ETFs. If Dimensional would be readily available, I'd switch in a heartbeat.
They have ETFs now. No advisor needed.
-Ben
There is silence from about 1:45:01 through 1:45:09
We had some slight audio issues during recording!
DFA is useless for most individuals atleast in the UAE. In 2021 they increased the mimumum investment from 100k USD to 500K USD with zero flexibility on the requirements . On enquiring and being extremely disappointed they ( AES international who sells DFA) told me 'DFA is more into preservation of assets than growth, we advice you to come back when you have 500k'.
DFA have ETF now. No minimum required
First.
Yea do!