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Portfolio > Asset Managers

DFA Enjoying Expansion

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In the first six months of 2006, Dimensional Fund Advisors had nearly $6.4 billion in net inflows, up from close to $5.6 billion in the same period of 2005, according to the Financial Research Corporation. Assets stood at some $67 billion in June vs. about $47 billion a year earlier.

DFA says it manages a total of $100 billion-plus of fund investments for both institutional and RIA clients worldwide. Its clients include some 570 independent advisory firms, each with at least $10 million in DFA investments.

Genworth Financial Advisers Corporation of Chicago, for instance, says more than 400 of its affiliated RIAs are selling DFA products nationwide. These advisors have a total of about $2.4 billion invested in DFA funds, according to Genworth VP Norm Mindel. Net new inflows have generally grown by 45 percent or more a year in the past decade, while redemptions have stayed under 2 percent. “We are very happy with the program,” Mindel adds.

But just how is Santa Monica, Calif.-based DFA attracting such inflows? According to Charles Massimo, president of CJM Fiscal Management in Garden City, N.Y., “There’s no better way to manage money over the long term.”

CJM has about $55 million in assets and 36 family relationships. Most of these assets are held in DFA portfolios that are bought through Loring Ward Asset Management & Advisory Services of San Jose, Calif., Massimo says.

“I realized that I needed DFA to be more successful,” explains Massimo, formerly with Merrill Lynch and Smith Barney. “It was a reason to leave the wirehouse environment” four years ago and start CJM (as a Royal Alliance affiliate), he says, since DFA funds are only sold via independent fee-based advisors.

Massimo’s “need for DFA” is based on the philosophy that markets are efficient and that you generate returns through asset allocation, he explains. “I look at their funds and put together a portfolio in order to generate the highest return with the lowest standard deviation. I’ve come to see that even in volatile markets, the portfolios do not fluctuate that much.”

DFA, which just opened a new office in Austin, Texas, began work in the asset-management and portfolio-design arena in 1981. Members of its board include Eugene Fama, Roger Ibbotson, Robert Merton and Myron Scholes.

For Massimo, explaining this approach to clients can take a bit of time, he admits. But, this means he’s educating clients about modern portfolio theory and standard deviation. “This is a different discussion than a lot of advisors have with their clients,” he explains. “And referrals come to me with a bit of knowledge.”

“Business is definitely growing,” says Massimo.


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