Dimensional Fund Advisors Case Fixed 1

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1.-Discuss DFA as a fund and as a business. How does it add value for investors? What are the pros and cons of the passive approach?
Our team thinks that DFA as a business is good especially since it is in a very competitive industry and many companies offer services in this category; but DFA’s market share is small at only 5%. Some pros about their passive approach are listed below. These will also explain how DFA works for as a fund and the value added for investors. DFA allocates the major portion of its resources in small-stock and micro-stock size (10%), so this strategy allows the firm to differentiate itself from its competitors. Indeed, according to the case, DFA is well-positioned in 96th place in Top 100 Firms Ranking by Worldwide Assets. On the other hand, DFA strategy is passive and its return is based on long term investments, therefore the firm is worried about establishing strong and durable relationships with their traders to align itself to this strategy. A third factor is its strong relationship with academic researchers to support its strategy, and the consistency of this relationship enables the pursuit of the same objective because the firm gives its investigators a share on return stock. The Fourth factor is referred to as value creation through reductions in transaction costs. Transaction costs are decreased by the firm and it transfers this advantage to the investor through charging lower fees than there competitors and other fund managers. From the point of view of growth of the firm, it has created wealth, giving individual investment services. Indeed, the firm has grown to $15 billion from 1981 until 2001, through this kind of investment only. Moreover, the opportunities that using academic research has brought to the firm has allowed it to expand its portfolio. Hence, the firm found an opportunity to extend its services and investment to a global level supported through recent academic research. This expansion is related to the

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