Getting Worse Every Day - Portfolio Manager Dimensional Fund Advisors Employee Review

The only things the firm invests in are pretty buildings. It’s all fake though. It fools clients into thinking that DFA isn’t crumbling underneath that nice facade. Underinvestment in IT is a persistent source of stress and operational risk. In a typical year, someone in PM can expect to lose two weeks of productivity to IT problems. Much smaller asset managers have more sophisticated and thoroughly documented optimizers than what DFA uses. DFA has a reputation as being academic. That is not the reality. There will be innovations in academic finance over the next few decades and DFA won’t pioneer the implementation of any of them. DFA refuses to recognize the valuable contributions of academics who are not associated with the firm. That should be a big red flag to anyone who cares about outcomes more than appearances. The firm engages in some dirty analysis of competitors’ approaches. Specifically, DFA’s work on the liquidity and momentum premiums fail to pass the sniff test. I would describe it as reverse p-hacking. They take statisically significant premiums and keep cutting the data in different ways until they get results that makes the premiums look insignificant. AQR seems to be far more devoted to academic rigor and intellectual honesty than DFA. The longer you stay at Dimensional, the further your compensation falls below the market rate. The firm rarely lays anyone off but they insist on paying below market so they slowly lose their better employees. A year ago the emerging markets desk had six authorized traders. Four of them have left the firm for better jobs since then. DFA insists that the team-based approach to PM means that they don’t have key man risk the way stock picking shops do. That is a lie. If you buy into this approach to investing then you’ve already realized that the average stock picker doesn’t actually add any value over benchmarks, so it doesn’t matter when you lose one. Factor-based investing actually adds value. At DFA the process is analogous to a workshop with several interdependent machines all working together to capture the premiums. Some PMs know how to work those machines better than others. Some PMs know a lot more about the underlying logic than others. As those PMs leave, the process gets a little bit worse. Moreover, the firms continues to automate processes that once had more manual intervention. That is fine in theory, but in practice I have not seen a single process automation that did not lead to a slightly worse outcome for the end investor. It is true that DFA fights for every basis point. Specifically, DFA fights for every basis point that ends up in David Booth’s pocket. Every process automation I saw left a few basis points on the table for end investors in order to enrich Booth. Strategy changes are boondoggles. The main decision makers for investment process changes come from research. These people have never sent a trade and do not focus on client preferences. DFA was a better manager when the people driving portfolio management process changes actually had portfolio management experience. Now research runs some simulations, spends a few years in analysis paralysis, and PM ends up implementing something slightly worse than what they would have implemented a couple years earlier without research input anyway. DFA weren’t even the first to implement the two extra factors that Fama and French added with the 5-factor model! It is embarrassing to see Booth go on Bloomberg or CNBC. The type of person who makes you wish you worked for a different person. No charisma. Not insightful. Takes the opportunity to insult employees at company events. Definitely the least talented rich person I have ever met. If someone like him came in today to get interviewed that person would not receive a job offer. Promotions come easier and quicker to employees in Austin. All things equal, you will get promoted quicker in Austin than anywhere else in the company. Even in Austin though, there is more noise than signal in the promotion decisions.