Dimensional Fund Advisors - 2002
Harvard Business School Case No.: 203-026; Teaching Note No.: 203-096
Posted: 13 Sep 2004
Date Written: September 30, 2002
SUBJECT AREAS: Careers & career planning, Efficient markets, Finance, Financial instruments, Investment management, Securities, Stocks, Success
CASE SETTING: Santa Monica, CA; investment management; $200 million revenues; 150 employees; 2002
Dimensional Fund Advisors (DFA) is an investment management firm that prides itself on basing its investment strategies on sound academic research. Many of the best known finance research papers of the past two decades (especially those by Eugene Fama and Kenneth French, who work closely with DFA) have led to DFA investment strategies. DFA began as a small-stock fund, attempting to take advantage of the "size affect" (excess performance of small stocks) that had been discovered by a number of academic researchers. Later, DFA added "value" strategies to its mix of offerings. After academic research documented superior performance by value stocks in a multitude of countries, DFA began to create a variety of international value-stock and small-stock investment funds. The company was highly successful, despite missing out on the great 1990s growth-stock boom. DFA's assets under management grew from $8 billion to $40 billion between 1991 and 2002. With value stocks having performed well in the first 2 years of the new decade, DFA is experiencing continued growth of its investor base and is now seeking new areas in which it can add value for investors while continuing to claim to have no special "stock-picking" ability.
Teaching Purpose: Teaches students about recent academic research in asset pricing and about how DFA has used that research as the basis of a highly successful firm.
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