Dimensional Fund Advisors grew out of the vast research of the 1950s-1970’s.  Two MBA graduates from the University of Chicago started the first DFA fund in 1981.  David G. Booth and Rex A. Sinquefield wanted to create some funds that applied the key principles derived from the previous 20-30 years of research that was part of the Modern Portfolio Theory, Efficient Market Theory, and the Three Factor Model.  The last two of these were developed by one of their own professors at the University of Chicago, Eugene F. Fama and his colleague, Kenneth French of Dartmouth.  That first small cap fund and those that followed over the next decade were developed with institutional investors in mind.  It was not until 1990 that DFA opened their funds for use by clients of approved fee-only registered investment advisors.  Compass Investments & Advising is an approved DFA advisor.

DFA provides an approach to investing that is not based on the traditional guidelines used by Wall Street.  Its model is solidly based in financial science and rooted in the research trends of Modern Portfolio Theory and Efficient Market Theory.  Both theories lead DFA to a structured approach to investing rather than mere speculation.  Believing that as much as 80-90 percent of total market return is determined by asset class selection (only about 10% to actual securities selection), the DFA model concentrates on development of funds that allow the broadest, world-wide asset class diversification possible.  Above and beyond mere global diversification, the model’s structure provides a balance of global asset classes which allow a somewhat, negatively correlated balance so the portfolio will have well performing asset classes to balance market periods when some asset classes are underperforming.  This balancing or smoothing effect can both moderate risk and improve annualized performance across the peaks and valleys of capital market performance.  The DFA asset class structure also allows a calculated weighting of the asset classes to capture the researched principles of greater performance over longer periods of both the value and small cap asset classes.

The strong representation of academics on the board at DFA from Stanford University, Dartmouth and University of Chicago, (Robert Merton, Myron Scholes, Kenneth French, Roger Ibbotson, and Eugene Fama) is a continued effort to make sure that their funds are on the cutting edge of current research.  New findings can then be implemented into the funds structure to continually seek that incremental improvement in performance while managing overall risk.  DFA’s goal is to add 1-2 percentage points of performance over conventional benchmarks.

With over $100 billion under DFA’s management, as of Q4 2008, it is one of the top fifteen largest mutual fund families.  Despite this, its lack of brand name familiarity attests to its penchant to avoid advertising and instead to build the best index-like mutual funds and let word- of- mouth do the advertising for them.

Compass Investments & Advising is pleased to be the only provider of DFA funds in the central Washington area. Like all other DFA advisors, Compass receives no compensation or fees from DFA for using their funds.  Compass uses the DFA funds in their strategic investing portfolios simply because they are the best funds available.

Using the best strategy, as supported by current research and historical market performance, and the best index funds available from Dimensional Fund Advisors, Compass Investments believes the path to financial security is more attainable than ever for the average investor.