Agenda Item: 3:00 pm
Joint Meeting of the Retirement Boards
Meeting Date: 3/25/2014
City of Fresno Retirement Systems
March 25, 2014
Joseph H. Chi, CFA, Co-Head of Portfolio Management and Vice President
Ted Simpson, CFA, Vice President
This information is provided for institutional investors and registered investment advisors, and is not intended for public use.
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.
Consider the investment objectives, risks, and charges and expenses of the Dimensional funds carefully before investing. For this and other
information about the Dimensional funds, please read the prospectus carefully before investing. Prospectuses are available by calling Dimensional
Fund Advisors collect at (512) 306-7400 or at www.dimensional.com.
Dimensional funds are distributed by DFA Securities LLC.
#17625-1011
Agenda
1. Dimensional
2. Investment Philosophy
3. Emerging Markets Value Portfolio
4. Emerging Markets Large Cap
Value Index
5. Summary
6. Appendix
Dimensional
Dimensional Fund Advisors
Putting financial science to work for clients
We use information in market prices throughout our investment process
to seek to build solutions with higher expected returns.
We add value by identifying relevant dimensions of expected returns
and continually balancing the tradeoffs among competing premiums,
diversification, and costs.
We work with clients to understand their long-term needs and
to add to their success.
3
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Global Investment Team,
One Dynamic Process
Investment Personnel
Founded in 1981
Client Service
Amsterdam
London
Vancouver
Santa Monica
Berlin
Toronto
Tokyo
Austin
Singapore
$338B in global AUM
Sydney
748 employees globally
Dimensional Fund Advisors LP founded in 1981. Global AUM and number of employees as of December 31, 2013.
Locations with offices operated by Dimensional. “Dimensional” refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA
Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.
4
Leading Financial Economists and Researchers
Academics on Dimensional’s Board of Directors
Eugene Fama, PhD, Nobel laureate
University of Chicago
Kenneth French, PhD
Dartmouth College
Leaders of Dimensional’s
Internal Research Staff
Eduardo Repetto, PhD, Director,
Co-Chief Executive Officer,
and Chief Investment Officer
Academics on Dimensional’s Mutual Funds Board of Directors
Gerard O’Reilly, PhD, Head of Research
George Constantinides, PhD
University of Chicago
James Davis, PhD, Vice President
John Gould, PhD
University of Chicago
Marlena Lee, PhD, Vice President
Edward Lazear, PhD
Stanford University
Savina Rizova, PhD, Vice President
Roger Ibbotson, PhD
Yale University
Stanley Black, PhD
Myron Scholes, PhD, Nobel laureate
Stanford University
Wes Crill, PhD
Abbie Smith, PhD
University of Chicago
Tu Nguyen, CFA, PhD
Massi De Santis, PhD
Academics Providing Ongoing Consulting Services to Dimensional
Vito Sciaraffia, PhD
Robert Merton, PhD, Nobel laureate Massachusetts Institute of Technology
Dave Twardowski, PhD
Sunil Wahal, PhD
Yusun Samuel Wang, PhD
As of December 31, 2013.
#22675-0312
Arizona State University
5
Experienced Teams Ensure Consistency
Eduardo Repetto,1 Director, Co-Chief Executive Officer, and Chief Investment Officer
David Booth,1 Chairman and Co-Chief Executive Officer
Stephen Clark,1 Head of Global Institutional Services and Senior Portfolio Manager
Gerard O’Reilly,1 Head of Research
Global
Portfolio Management
Equity
Portfolio Management
Joseph Chi,1 Co-Head of Portfolio Management
Portfolio Managers:
Marcus Axthelm, Murray Cockerell,
Paul Foley, Jason Ha, Kotaro Hama,
Iwona Hill, Stephen Hughes, David Kershner,
Arun Keswani, Nathan Lacaze, John Law,
Robert Ness, Daniel Ong, Allen Pu,
Stephen Quance, Ted Randall, Joel Schneider,
Bhanu Singh, Lukas Smart, Adam Ward,
Brian Walsh, Craig Wright
Jed Fogdall,1 Co-Head of Portfolio Management
Robert Deere,1 Investment Director and Senior
Portfolio Manager
Graham Lennon, Head of International Portfolio
Management and Senior Portfolio Manager
Arthur Barlow, Managing Director and
Senior Portfolio Manager
Akbar Ali, Senior Portfolio Manager
Grady Smith, Senior Portfolio Manager
Karen Umland,1 Senior Portfolio Manager
Stephen Garth, Portfolio Manager
Fixed Income
Portfolio Management
David Plecha,1 Global Head of Fixed Income
Joseph Kolerich,1 Senior Portfolio Manager
Portfolio Managers:
Alexander Fridman, Didier Haenecour, Alan
Hutchison, Damien Koch, Travis Meldau, Pamela
Noble, Gillian Wilson
Investment Associates:
Joshua Clifford, Emily Cornell, Damian Dormer,
Mitchell Firestein, Krati Gokharu, Edward Grace,
Joe Hohn, Mary Phillips, Slava Platkov,
David Quinn, Sunil Suri, Jim Whittington,
Alex Yaftali
Trading
Henry Gray,1 Head of Global Equity Trading
John Romiza, Head of International
Equity Trading
Jason Lapping, Head of Asia Pacific Trading
Global Equity Trading
Senior Traders:
Mark Butterworth, Christian Gunther,
Carl Snyder, Ryan Wiley, Sam Willis
Traders:
Matthew Fuentes, William Letheren,
Richard Mar, Erhan Oktay, Chris Rink,
James Simpson, Jonathan Smith,
Le Tran, Scott Van Pelt, David Vrolyk
Fixed Income
Trading
David LaRusso, Senior Trader
Kipp Cummins, Trader
Claudette Higdon, Trader
Investment Associates:
Yan Luo, David Shao, Polly Weiss
As of December 31, 2013.
1. Investment Committee Member.
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6
Dimensional Global Investment Solutions
$338 billion in global AUM as of December 31, 2013
(in billions)
US
$103.2
Developed ex-US
$72.6
Fixed Income
All Cap Core
$29.0
All Cap Core
$16.0
All Cap Value
$4.7
All Cap Value
$6.1
US Tax-Exempt
Growth
$0.4
Growth
$0.1
Non-US & Global
Large Cap
$5.6
Large Cap
$6.6
Inflation-Protected
Large Cap Value
$16.6
Large Cap Value
$17.0
SMID Cap Value
$10.4
Small Cap
$13.4
Small Cap
$14.4
Small Cap Value
$13.3
Small Cap Value
$16.4
Micro Cap
$5.7
Global Equity
All Cap/Large Cap
Emerging Markets
$59.6
All Cap Core
$17.6
Value
$30.4
Large Cap
$7.3
Small Cap
$4.3
Small/SMID Cap
$2.1
$12.0
Real Estate
$7.5
Commodities
$0.8
Global Balanced
$3.7
$39.7
US
Equities
30.6%
$11.2
$7.1
Other
US Taxable
$20.4
Value
$69.8
REITs &
Commodities
2.5%
Global
Balanced
1.1% Global
$2.8
$24.7
$2.6
Developed
ex-US
Equities
21.5%
Fixed
Income
20.7%
Emerging
Markets
17.6%
Equity
6%
“Dimensional” refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada
ULC, Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.
All assets in US dollars. Numbers may not total 100% due to rounding.
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7
Investment Philosophy
Dimensions of Expected Returns
Expected returns are driven by prices investors pay and cash flows they expect to receive
Market
Equity premium – stocks vs bonds
Company Size
Small cap premium – small vs large companies
To be considered a
dimension of expected return,
a premium must be:
• Sensible
• Persistent across time periods
• Pervasive across markets
Relative Price1
Value premium – value vs growth companies
• Robust to alternative
specifications
Expected Profitability
• Cost-effective to capture in
well-diversified portfolios
Profitability premium – high vs low profitability companies
1. Relative Price refers to the share price (or market cap) of a firm’s stock, divided by a fundamental variable of the firm (e.g., earnings, cash earnings, dividends, net assets). One of the most widely used measures of relative price is the
price/book ratio.
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9
Dimensions of Expected Returns
Illustrative index performance
High
Relative Price
Low
Relative Price
US Large
Capitalization Stocks
US Small
Capitalization Stocks
Non-US Developed
Markets Stocks
Emerging
Markets Stocks
1927–2012
1927–2012
1975–2012
1989–2012
9.25
8.69
Fama/French US
Large Growth Research Index
11.64
Fama/French US Large
Value Research Index
10.31
8.79
Fama/French US
Small Growth Research Index
Fama/French
Emerging Markets Growth Index
Fama/French
International Growth Index
14.77
14.85
Fama/French US Small
Value Research Index
15.95
Fama/French Emerging
Markets Value Index
Fama/French
International Value Index
14.79
Small
Benchmark
Low
Profitability
High
Profitability
Dimensional International
Small Cap Index
9.82
11.54
13.44
Fama/French Emerging
Markets Small Cap Index
11.71
10.69
S&P 500 Index
CRSP 6-10 Index
MSCI World ex US Index
MSCI Emerging Markets Index
1975–2012
1975–2012
1992–2012
1996–2012
10.58
8.66
Dimensional US Large
Low Profitability Index
2.81
Dimensional US Small
Low Profitability Index
14.44
Dimensional US Large
High Profitability Index
18.59
Dimensional US Small
High Profitability Index
11.66
Benchmark
S&P 500 Index
4.31
Dimensional International
Low Profitability Index
8.93
Dimensional International
High Profitability Index
15.19
CRSP 6-10 Index
Dimensional Emerging Markets
Low Profitability Index
5.79
MSCI World ex US Index
11.15
Dimensional Emerging Markets
High Profitability Index
7.70
MSCI Emerging Markets Index
Annualized compound returns (%) in US dollars.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future
results. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. See “Index Descriptions” in the
appendix for descriptions of Dimensional and Fama/French index data. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 2013, all rights reserved.
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10
5-Year Moving Average of Premiums
Emerging markets
---Annual Average
 Within 2% of Average
MARKET PREMIUM
Return Premium
40%
30%
20%
14.24%
10%
0%
-10%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Return Premium
VALUE PREMIUM
20%
10%
7.06%
0%
-10%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SIZE PREMIUM
Return Premium
10%
2.29%
0%
-10%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Emerging Markets Market Premium: Fama/French Emerging Markets Index minus One-Month US Treasury Bills. Emerging Markets Value premium: Fama/French Emerging Markets Value Index minus Fama/French Emerging Markets Growth
Index. Emerging Markets Size Premium: Fama/French Emerging Markets Small Cap Index minus Fama/French Emerging Markets Index. Emerging Markets returns are simulated by Fama/French from IFC and Bloomberg data and are freefloat weighted. In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.
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11
Emerging Markets Value Portfolio
Emerging Markets Value Portfolio
Using an integrated approach to add value across all aspects of the investment process
• Structured based on systematic
expected premiums:
– Market
– Relative price (value)
– Expected profitability
– Company size
• Offers broad sector and
security diversification
• Balances competing premiums
and controls implementation
costs by using a disciplined and
patient trading strategy
Countries and names as of December 31, 2013. Holdings are subject to change.
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13
Dynamic Investment Process
An integrated approach to adding value
• The Market
Use information in prices and
fundamental data to pursue
higher expected returns.
• Portfolio Structure
Identify the dimensions
of expected returns and
consider the interactions
among premiums,
diversification, and costs.
• Implementation
Maintain strategy focus
while balancing tradeoffs
among competing premiums
and use a flexible process to
help control costs.
14
17867-1011
Country Weight Targets
As of December 31, 2013
EMERGING MARKETS VALUE PORTFOLIO
Dimensional Targets
(buys capped at 15.0%)
China
Taiwan
South Korea
Brazil
South Africa
India
Mexico
Russia
Malaysia
Indonesia
Thailand
Poland
Turkey
Chile
Philippines
Colombia
Greece
Hungary
Czech Republic
15.0%
15.0%
15.0%
9.8%
8.2%
6.8%
6.3%
6.0%
4.3%
2.6%
2.5%
2.1%
1.8%
1.5%
1.1%
0.9%
0.6%
0.3%
0.2%
Dimensional’s capped free-float
adjusted market cap targets:
• Maintain limits on singlecountry exposure.
• Mitigate single-country risk.
An event in one country can
have a negative impact on
the whole portfolio.
• Provide broad country
diversification.
15
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Portfolio Construction:
Security Selection and Weighting
Emerging Markets Value Portfolio as of December 31, 2013
EXPECTED
PROFITABILITY1
RELATIVE PRICE
HIGH
HIGH
LOWEST
• In large caps, increased
emphasis on higher expected
return securities:
– Lower relative price, higher
expected profitability, lower
market cap
MID
SIZE
SMALL
Stocks
below 15%
market cap
limit
LOW
RELATIVE PRICE
Stocks with
Lowest 33%
of P/B ratios
• In small caps, exclude companies
with lowest expected returns:
HIGH
– Low expected profitability and
high relative price
LOW
EXPECTED
PROFITABILITY1
LOW
SIZE
MEGA
LARGE
LOW
• Focus on deep value securities
LOWEST
LOW
Weighted Average
Market Cap (millions)
Aggregate
Price-to-Book
Weighted Direct
Profitability-to-Book
Emerging Markets Value Portfolio
$25,356
0.89
0.17
MSCI Emerging Markets Index
$45,464
1.48
0.29
RELATIVE PRICE
For illustrative purposes only.
1. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book.
Holdings are subject to change. MSCI data copyright MSCI 2014, all rights reserved.
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16
Portfolio Construction: Seeking to Improve Expected Returns
Refining the universe
Asset Class Exclusions
Pricing Exclusions
Trading Exclusions
• REITs
• Recent IPO
• Exchange history
• Investment funds
• Share classes with foreign
restrictions or with
significant premiums
• Insufficient liquidity
• Highly regulated utilities
• Extreme financial distress
or bankruptcy
• Limited operating history
• Insufficient float
• Listing requirements
• Merger or target of
acquisition
Note: These rules seek to exclude from purchase securities Dimensional determines to fall within these categories.
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17
Managing Momentum
We incorporate momentum when making buy and sell decisions
NEGATIVE MOMENTUM
PAST
TODAY
POSITIVE MOMENTUM
FUTURE
PAST
TODAY
FUTURE
RELATIVE RETURN
• Stocks with large relative
underperformance tend
to have negative excess
returns in the next period.
• Stocks with large relative
outperformance tend to
have positive excess returns
in the next period.
Delay buys of
securities otherwise
eligible for purchase.
Charts for illustrative purposes only.
#17600-1011
Stock returns may exhibit
momentum:
Delay sells of
securities otherwise
eligible for sale.
18
Trading Costs Matter
Our approach helps minimize the total costs of trading
Trading Costs
=
Explicit Costs
Commissions,
custody fees,
exchange fees
Low turnover by
design keeps overall
trading costs down.
We deal with explicit costs
by keeping commissions
as low as possible without
sacrificing overall execution.
+
Implicit Costs
Bid/ask spread,
market impact
Implicit costs can be
hidden—and potentially
large. We apply a trading
philosophy that emphasizes
patience and flexibility.
19
#17600-1011
Dimensional’s Progressive Approach to Trading
Trading utilizes technology and internal resources to maximize opportunities and control costs
Quarterly: January 2006–March 2013
• Our trading and portfolio
management desks are placed
strategically to cover
the global equity markets.
PERCENTAGE OF DIMENSIONAL’S GLOBAL TRADE VALUE BY BROKER TYPE
High Touch
Low Touch
Direct Market Access
100%
• Traders use direct market
access (DMA) when available
to maintain full control
of trading process and
reduce commissions.
50%
0%
2006
2007
2008
2009
Source: Dimensional. Chart data based on all equity agency trades, globally.
#17600-1011
2010
2011
2012
2013
20
Integrated Portfolio Implementation
Efficiently balancing expected premiums with the costs of turnover on a daily basis
• We continuously evaluate
the portfolio:
– Buy/sell decisions consider
expected daily premiums
versus transactions costs.
– Spread trading over time to
minimize market impact.
• Our process is built to focus on
higher expected returns every
day while considering costs.
21
#17600-1011
Dimensional’s Value Added through Trading
Third-party trade cost analysis results across all segments of the market
One Year Ending September 30, 2013
TM
ITG POST-TRADE ANALYTICS
ALPHA CAPTURE
SM
Trading Costs (gain/loss)
Strategy
1
Median Peer
Dimensional
US Large Cap Trading
-27 bps
+20 bps
100%
US Small Cap Trading
-61 bps
+60 bps
100%
-47 bps
+55 bps
100%
-62 bps
+72 bps
100%
All Developed Markets Trading
All Emerging Markets Trading
2
Dimensional Rank
Past performance is no guarantee of future results. The performance returns calculated for the Dimensional strategies already reflect trading costs.
bps (basis point) One hundredth of a percentage point (0.01%). ITG ALPHA CAPTURE is a service mark of the Investment Technology Group, Inc. companies.
1. Percent of peer universe Dimensional outperforms in terms of trading costs.
2. US trading included in results only for portfolios with global mandates.
The information on this slide was provided by Investment Technology Group solely for Dimensional and not for any other third party. These materials are highly confidential and are not to be copied, displayed, or transmitted in any form
without prior written permission from Investment Technology Group.
#17600-1011
22
Characteristics
As of December 31, 2013
EMERGING MARKETS
VALUE PORTFOLIO
MSCI Emerging
Markets Index
$1,419,374
$3,795,148
2,195
823
$25,356
$45,464
$350
$5,379
0.89
1.48
2.47%
2.26%
0.17
0.29
MARKET CHARACTERISTICS
Total Value of Eligible Universe (millions)
Number of Holdings
SIZE CHARACTERISTICS
Wtd. Average Market Cap (millions)
Median Market Cap (millions)
VALUATION CHARACTERISTICS
Aggregate Price-to-Book
Wtd. Average Dividend-to-Price
PROFITABILITY CHARACTERISTICS
Weighted Direct Profitability-to-Book 1
1. Operating income before depreciation and amortization minus interest expense scaled by book.
Holdings are subject to change. MSCI data copyright MSCI 2014, all rights reserved.
#17595-1011
23
Sector Allocations
As of December 31, 2013
EMERGING MARKETS
VALUE PORTFOLIO
MSCI Emerging
Markets Index
Financials
33.9
26.3
Energy
15.9
11.3
Materials
15.5
9.7
Industrials
12.0
6.5
Information Technology
7.5
16.0
Consumer Discretionary
6.4
8.9
Consumer Staples
5.1
8.6
Utilities
1.9
3.4
Telecommunication Services
1.3
7.4
Health Care
0.4
1.7
REITs
0.1
0.4
Other
0.0
—
PORTFOLIO WEIGHTS (%)
Numbers may not total 100% due to rounding. Sectors defined by MSCI. MSCI data copyright MSCI 2014, all rights reserved. The REITs industry, a member of the Financials sector, is shown separately to illustrate its exclusion from
certain funds.
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24
Country Allocations
As of December 31, 2013
EMERGING MARKETS
VALUE PORTFOLIO
MSCI Emerging
Markets Index
PORTFOLIO WEIGHTS (%)
REGIONAL SNAPSHOT
South Korea
16.3
16.1
Taiwan
15.8
11.7
China
15.5
19.8
Brazil
9.8
10.7
Mexico
7.3
5.4
South Africa
7.1
7.4
India
7.1
6.3
Russia
5.0
6.1
Malaysia
3.9
3.8
Thailand
2.9
2.2
Turkey
2.2
1.5
Indonesia
2.2
2.2
Poland
1.7
1.7
Chile
1.5
1.6
Philippines
1.0
0.9
Hungary
0.5
0.3
Colombia
0.2
1.0
Czech Republic
0.2
Greece
Emerging
Markets
Value
Portfolio
MSCI
Emerging
Markets
Index
Asia Pacific
64.5%
63.0%
Latin America
18.8%
19.1%
0.2
Europe
9.6%
10.3%
0.1
0.5
Africa
7.1%
7.6%
Egypt
—
0.2
Peru
—
0.4
Holdings are subject to change. Numbers may not total 100% due to rounding. MSCI data copyright MSCI 2014, all rights reserved.
#17624-1011
25
Performance
As of December 31, 2013
1 Year
3 Years
5 Years
10 Years
Since 5/98
Portfolio
Inception
EMERGING MARKETS VALUE PORTFOLIO
-3.80
-5.12
14.92
12.97
12.50
MSCI Emerging Markets Index (net dividends)
-2.60
-2.06
14.79
11.17
—
MSCI Emerging Markets Index (gross dividends)
-2.27
-1.74
15.15
11.52
8.33
1
Annualized Returns (%)
EMERGING MARKETS
VALUE PORTFOLIO
MSCI Emerging Markets
Index (net dividends)
2004
39.53
25.55
2005
30.81
34.00
2006
37.93
32.17
2007
45.64
39.39
2008
-53.94
-53.33
2009
92.28
78.51
2010
22.06
18.88
2011
-25.62
-18.42
2012
19.36
18.22
2013
-3.80
-2.60
Calendar Year
Returns (%)
Performance data shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. The
investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. To obtain
the most current month-end performance data, visit www.dimensional.com.
1. Returns for periods shorter than one year are not annualized. Portfolio inception returns are from the first full month.
MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment. See “Appendix: Standardized Performance Data & Disclosures” to learn how to obtain complete information on performance, investment
objectives, risks, advisory fees, and expenses of Dimensional’s funds.
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26
Emerging Markets Environment
MSCI Emerging Markets IMI Index (net dividends)
4TH QUARTER 2013
Value
Neutral
Growth
Large
2.02%
0.72%
5.78%
Mid
1.40%
1.01%
3.53%
Small
0.73%
0.30%
1.68%
Value
Neutral
Growth
Large
-0.76%
-6.30%
11.10%
Mid
-4.83%
-5.05%
-2.75%
Small
-1.53%
-1.23%
6.52%
1 YEAR AS OF DECEMBER 31, 2013
Large cap is defined as approximately the largest 70% of total US market capitalization; Mid cap is approximately the next 20%; and Small cap is approximately the bottom 10%. Growth is defined as approximately the bottom 25% of
securities based on book-to-market; neutral is approximately the next 50%; and value is approximately the highest 25% of securities based on book-to-market.
MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
27
Fees
Emerging Markets Value Portfolio
1. Actual fees as of October 31, 2013.
#17868-1011
Net Expense
Ratio1
Total (Gross)
Expense Ratio1
Management
Fee
0.57
0.57
0.50
28
Emerging Markets Large Cap Value
Index
Emerging Markets Large Cap Value Index
Using an integrated approach to add value across all aspects of the investment process
• Structured based on systematic
expected premiums:
– Market
– Relative price (value)
– Expected profitability
– Company size
• Offers broad sector and
security diversification
• Balances competing premiums
and controls implementation
costs by using a disciplined and
patient trading strategy
Countries and names as of December 31, 2013. Holdings are subject to change.
#17868-1011
30
Country Weight Targets
As of December 31, 2013
EMERGING MARKETS LARGE CAP VALUE INDEX
Dimensional Targets
(buys capped at 15.0%)
China
South Korea
Taiwan
Brazil
India
South Africa
Mexico
Russia
Malaysia
Poland
Indonesia
Thailand
Chile
Colombia
Turkey
Philippines
Hungary
Greece
15.0%
15.0%
15.0%
9.1%
7.9%
7.3%
7.2%
5.6%
5.2%
2.4%
2.3%
1.9%
1.5%
1.3%
1.1%
1.0%
0.9%
0.3%
Dimensional’s capped free-float
adjusted market cap targets:
• Maintain limits on singlecountry exposure.
• Mitigate single-country risk.
An event in one country can
have a negative impact on
the whole portfolio.
• Provide broad country
diversification.
31
#17625-1011
Portfolio Construction:
Security Selection and Weighting
Emerging Markets Large Cap Value Index as of December 31, 2013
EXPECTED
PROFITABILITY1
RELATIVE PRICE
HIGH
HIGH
SIZE
MEGA
LOW
Stocks
below 15%
market cap
limit
LOWEST
• In large caps, increased
emphasis on higher expected
return securities:
– Lower relative price, higher
expected profitability, lower
market cap
MID
SMALL
SIZE
LARGE
LOW
• Focus on deep value securities
LOW
• In small caps, exclude companies
with lowest expected returns:
RELATIVE PRICE
– Low expected profitability and
high relative price
Weighted Average
Market Cap (millions)
Aggregate
Price-to-Book
Weighted Direct
Profitability-to-Book
DFA Emerging Markets Large Cap Value Index
$38,113
1.02
0.22
MSCI Emerging Markets Index
$45,464
1.48
0.29
For illustrative purposes only.
1. Profitability is measured as operating income before depreciation and amortization minus interest expense scaled by book.
Holdings are subject to change. MSCI data copyright MSCI 2014, all rights reserved.
#17869-1011
32
Characteristics Comparison
As of December 31, 2013
EMERGING MARKETS
LARGE CAP VALUE INDEX
MSCI Emerging
Markets Index
$1,123,529
$3,795,148
224
823
$38,113
$45,464
$5,313
$5,379
1.02
1.48
2.46%
2.26%
0.22
0.29
MARKET CHARACTERISTICS
Total Value of Eligible Universe (millions)
Number of Holdings
SIZE CHARACTERISTICS
Wtd. Average Market Cap (millions)
Median Market Cap (millions)
VALUATION CHARACTERISTICS
Aggregate Price-to-Book
Wtd. Average Dividend-to-Price
PROFITABILITY CHARACTERISTICS
Weighted Direct Profitability-to-Book 1
1. Operating income before depreciation and amortization minus interest expense scaled by book.
Holdings are subject to change. MSCI data copyright MSCI 2014, all rights reserved.
#17595-1011
33
Sector Allocations Comparison
As of December 31, 2013
EMERGING MARKETS
LARGE CAP VALUE INDEX
MSCI Emerging
Markets Index
Financials
33.8
26.3
Materials
19.0
9.7
Energy
15.2
11.3
Information Technology
9.3
16.0
Consumer Discretionary
8.6
8.9
Industrials
6.3
6.5
Consumer Staples
4.2
8.6
Utilities
2.8
3.4
Telecommunication Services
0.8
7.4
Health Care
0.0
1.7
REITs
0.0
0.4
PORTFOLIO WEIGHTS (%)
Numbers may not total 100% due to rounding. Sectors defined by MSCI. MSCI data copyright MSCI 2014, all rights reserved. The REITs industry, a member of the Financials sector, is shown separately to illustrate its exclusion from
certain funds.
#17600-1011
34
Country Allocations Comparison
As of December 31, 2013
EMERGING MARKETS
LARGE CAP VALUE INDEX
MSCI Emerging
Markets Index
PORTFOLIO WEIGHTS (%)
REGIONAL SNAPSHOT
China
15.0
19.8
South Korea
15.0
16.1
Taiwan
15.0
11.7
Brazil
9.1
10.7
India
7.9
6.3
South Africa
7.3
7.4
Mexico
7.2
5.4
Russia
5.6
6.1
Malaysia
5.2
3.8
Poland
2.4
1.7
Indonesia
2.3
2.2
Thailand
1.9
2.2
Chile
1.5
1.6
Colombia
1.3
1.0
Turkey
1.1
1.5
Philippines
1.0
0.9
Hungary
0.9
0.3
Greece
0.3
Czech Republic
Emerging
Markets Large
Cap Value
Index
MSCI
Emerging
Markets
Index
Asia Pacific
63.3%
63.0%
Latin America
19.1%
19.1%
0.5
Europe
10.3%
10.3%
0.0
0.2
Africa
7.3%
7.6%
Egypt
0.0
0.2
Peru
0.0
0.4
Holdings are subject to change. Numbers may not total 100% due to rounding. MSCI data copyright MSCI 2014, all rights reserved.
#17624-1011
35
Performance Comparison
As of December 31, 2013
1 Year
3 Years
5 Years
10 Years
Since 1/94
Large Value
Index Inception
EMERGING MARKETS LARGE CAP VALUE INDEX
-3.81
-2.77
17.06
14.24
10.79
MSCI Emerging Markets Index (net dividends)
-2.60
-2.06
14.79
11.17
—
MSCI Emerging Markets Index (gross dividends)
-2.27
-1.74
15.15
11.52
5.70
Annualized Returns (%)
EMERGING MARKETS LARGE
CAP VALUE INDEX
MSCI Emerging Markets
Index (net dividends)
2004
34.13
25.55
2005
28.10
34.00
2006
35.65
32.17
2007
47.91
39.39
2008
-50.05
-53.33
2009
93.97
78.51
2010
23.28
18.88
2011
-19.55
-18.42
2012
18.80
18.22
2013
-3.81
-2.60
Calendar Year
Returns (%)
The Emerging Markets Large Cap Value Index monthly returns are computed as the simple average of the monthly returns of four sub-indices, each one reconstituted once a year at the end of each quarter of the year. Filters were applied
to data retroactively and with the benefit of hindsight. Returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. It is not possible to invest directly
in an index, which is unmanaged. Please see “Appendix” for index description.
MSCI data copyright MSCI 2014, all rights reserved. Indices are not available for direct investment.
#17595-1011
36
Fees
Emerging Markets Large Cap Value Separate Account
PROPOSED FEES FOR CITY OF FRESNO RETIREMENT SYSTEMS
Separate Account Fee: 55 bps
Minimum Annual Fee: $175,000
37
Summary
Dimensional Fund Advisors
A global investment firm1 with a research-based, transparent, and process-driven approach
An investment philosophy based on sound academic research
An investment process that adds value through portfolio structure
and implementation
Investment solutions that provide access to sources of higher
expected returns
A firmwide commitment to our clients
1. Refers to the Dimensional entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., DFA Australia Limited, Dimensional Fund Advisors Canada ULC,
Dimensional Fund Advisors Pte. Ltd., and Dimensional Japan Ltd.
#17867-1011
39
Thank You!
Appendix
Standardized Performance Data & Disclosures
Performance data shown represents past performance. Past
performance is no guarantee of future results, and current
performance may be higher or lower than the performance shown.
The investment return and principal value of an investment will
fluctuate so that an investor’s shares, when redeemed, may be
worth more or less than their original cost. To obtain performance
data current to the most recent month end, access our website at
www.dimensional.com.
Consider the investment objectives, risks, and charges and expenses
of the Dimensional funds carefully before investing. For this and
other information about the Dimensional funds, please read the
prospectus carefully before investing. Prospectuses are available by
calling Dimensional Fund Advisors collect at (512) 306–7400 or at
www.dimensional.com. Dimensional funds are distributed by DFA
Securities LLC.
Dimensional Fund Advisors LP is an investment advisor registered with
the Securities and Exchange Commission.
Risks include loss of principal and fluctuating value. Investment value
will fluctuate, and shares, when redeemed, may be worth more or less
than original cost.
Small and micro cap securities are subject to greater volatility than
those in other asset categories.
International and emerging markets investing involves special risks
such as currency fluctuation and political instability. Investing in
emerging markets may accentuate these risks.
Sector-specific investments focus on a specific segment of the market,
which can increase investment risks.
Fixed income securities are subject to increased loss of principal during
periods of rising interest rates. Fixed income investments are subject to
various other risks, including changes in credit quality, liquidity,
prepayments, call risk and other factors. Municipal securities are subject
to the risks of adverse economic and regulatory changes in their issuing
states.
Real estate investment risks include changes in real estate values and
property taxes, interest rates, cash flow of underlying real estate assets,
supply and demand, and the management skill and creditworthiness of
the issuer.
Sustainability funds use environmental and social screens that may limit
investment opportunities for the fund.
Commodities include increased risks, such as political, economic, and
currency instability, and may not be suitable for all investors. The
Portfolio may be more volatile than a diversified fund because the
Portfolio invests in a smaller number of issuers and commodity sectors.
The fund prospectuses contain more information about investment
risks.
42
#28230-0912
Standardized Performance Data & Disclosures
As of December 31, 2013
Average Annual Total Returns (%)
US Equity Portfolios
US Core Equity 1 Portfolio2
US Core Equity 2 Portfolio2
US Vector Equity Portfolio2
US Micro Cap Portfolio
US Small Cap Portfolio
US Small Cap Value Portfolio
US Small Cap Growth Portfolio2
US Targeted Value Portfolio2
US Large Cap Value Portfolio
US Large Cap Growth Portfolio2
US Large Company Portfolio2,3
Enhanced US Large Company Portfolio
Net
Expense
Ratio1 (%)
Total (Gross)
Expense
Ratio1 (%)
Management
Fee
Inception
Date
Symbol
1 Year
5 Years
10 Years
Since
Inception
DFEOX
DFQTX
DFVEX
DFSCX
DFSTX
DFSVX
DSCGX
DFFVX
DFLVX
DUSLX
DFUSX
DFELX
36.60
37.76
40.21
45.06
42.21
42.38
42.73
43.03
40.32
33.93
32.33
32.11
19.87
20.16
20.81
22.78
23.78
22.89
—
22.14
21.02
—
17.91
18.66
—
—
—
9.29
10.15
10.02
—
10.42
8.88
—
7.42
7.35
8.11
8.09
8.21
12.58
11.20
12.90
42.07
13.05
10.52
32.53
4.53
8.14
0.19
0.22
0.32
0.52
0.37
0.52
0.40
0.37
0.27
0.20
0.08
0.24
0.19
0.22
0.32
0.52
0.37
0.52
0.50
0.37
0.27
0.29
0.09
0.24
0.17
0.20
0.30
0.50
0.35
0.50
0.35
0.35
0.25
0.17
0.06
0.20
9/15/2005
9/15/2005
12/30/2005
12/23/1981
3/19/1992
3/2/1993
12/20/2012
2/23/2000
2/19/1993
12/20/2012
9/23/1999
7/2/1996
Non-US Equity Portfolios
International Core Equity Portfolio2
International Vector Equity Portfolio2
International Small Company Portfolio2
International Small Cap Value Portfolio
International Small Cap Growth Portfolio2
International Value Portfolio
International Large Cap Growth Portfolio2
Large Cap International Portfolio
Emerging Markets Core Equity Portfolio2
Emerging Markets Small Cap Portfolio
Emerging Markets Value Portfolio
Emerging Markets Portfolio
World ex US Value Portfolio2
World ex US Targeted Value Portfolio 2
World ex US Core Equity Portfolio2
DFIEX
DFVQX
DFISX
DISVX
DISMX
DFIVX
DILRX
DFALX
DFCEX
DEMSX
DFEVX
DFEMX
DFWVX
DWUSX
DFWIX
23.43
24.31
27.44
32.39
27.60
23.12
22.99
20.69
-2.64
-1.38
-3.80
-3.12
17.02
19.91
—
14.57
15.53
17.67
17.09
—
12.98
—
12.22
16.13
19.82
14.92
14.81
—
—
—
—
—
10.31
10.92
—
8.05
—
7.03
—
13.18
12.97
11.63
—
—
—
5.98
6.44
7.60
8.28
27.31
7.24
22.60
6.27
10.04
12.96
12.17
7.73
8.63
24.21
11.04
0.39
0.51
0.54
0.69
0.55
0.43
0.30
0.29
0.63
0.75
0.57
0.57
0.60
0.79
0.47
0.39
0.51
0.54
0.69
1.00
0.43
0.65
0.29
0.63
0.75
0.57
0.57
0.76
1.27
0.97
0.35
0.45
0.40
0.65
0.50
0.40
0.25
0.25
0.55
0.65
0.50
0.50
0.47
0.58
0.40
9/15/2005
8/14/2008
9/30/1996
12/29/1994
12/20/2012
2/15/1994
12/20/2012
7/17/1991
4/5/2005
3/5/1998
4/1/1998
4/25/1994
8/23/2010
11/1/2012
4/9/2013
Global Portfolios
2
Global Allocation 25/75 Portfolio
2
Global Allocation 60/40 Portfolio
2
Global Equity Portfolio
Selectively Hedged Global Equity Portfolio2
DGTSX
DGSIX
DGEIX
DSHGX
5.85
15.97
29.15
24.69
7.22
12.86
17.82
—
4.91
6.82
8.51
—
4.94
6.92
8.68
19.50
0.27
0.29
0.31
0.40
0.44
0.52
0.61
0.72
0.20
0.25
0.30
0.30
12/24/2003
12/24/2003
12/24/2003
11/14/2011
1. Actual fees as of October 31, 2013.
2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to
the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses.
3. Effective August 1, 2013, the administrative fee payable by the Portfolio to the Advisor decreased from 0.05% to 0.035% of the Portfolio’s average daily net assets on an annualized basis. As a result, the Total Operating Expense Ratio
has been adjusted to reflect the estimated management fee to be paid by the portfolio through 10/31/2014. The Advisor has contractually agreed to reduce the fee waiver expense limit from 0.10% to 0.08% of the Portfolio’s average daily
net assets on an annualized basis.
#28230-0912
43
Standardized Performance Data & Disclosures
As of December 31, 2013
Average Annual Total Returns (%)
Tax Managed Portfolios3
Tax-Managed US Small Cap Portfolio
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
Tax-Managed US Targeted Value Portfolio
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
Tax-Managed US Equity Portfolio2
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
Tax-Managed US Marketwide Value Portfolio
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
Tax-Managed International Value Portfolio
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
TA US Core Equity 2 Portfolio2,3
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
TA World ex US Core Equity Portfolio2,3
After Taxes on Distributions
After Taxes on Distributions and Sale of Fund Shares
Symbol
1 Year
5 Years
10 Years
Since
Inception
DFTSX
43.37
42.98
24.53
43.86
42.55
25.46
34.17
33.18
19.28
40.31
39.47
22.76
22.65
21.26
12.73
37.55
36.69
21.44
16.61
15.33
9.40
21.76
21.56
17.85
22.23
21.79
18.26
17.95
17.51
14.52
21.51
21.12
17.58
12.53
12.07
10.17
20.02
19.58
16.30
14.66
14.18
11.88
9.01
8.73
7.39
9.29
8.61
7.64
7.69
7.36
6.23
9.24
8.92
7.56
8.19
7.57
7.00
—
—
—
—
—
—
10.27
10.05
8.76
11.20
10.68
9.60
7.50
7.20
6.13
7.47
7.14
6.14
6.94
6.39
5.90
6.62
6.25
5.17
3.06
2.63
2.43
DTMVX
DTMEX
DTMMX
DTMIX
DFTCX
DFTWX
Net
Expense
Ratio1 (%)
Total (Gross)
Expense
Ratio1 (%)
Management
Fee
Inception
Date
0.52
0.52
0.50
12/15/1998
0.44
0.44
0.42
12/11/1998
0.22
0.22
0.20
9/25/2001
0.37
0.37
0.35
12/14/1998
0.53
0.53
0.50
4/16/1999
0.24
0.24
0.22
10/4/2007
0.46
0.46
0.40
3/6/2008
Real Estate Portfolios
Real Estate Securities Portfolio2
International Real Estate Securities Portfolio2
Global Real Estate Securities Portfolio2
DFREX
DFITX
DFGEX
1.39
2.27
1.77
16.44
15.29
15.95
8.22
—
—
9.79
-1.84
3.02
0.18
0.39
0.32
0.19
0.39
0.55
0.17
0.35
0.27
1/5/1993
3/1/2007
6/4/2008
Social and Sustainability Portfolios
US Sustainability Core 1 Portfolio2
International Sustainability Core 1 Portfolio2
US Social Core Equity 2 Portfolio2
International Social Core Equity Portfolio2
Emerging Markets Social Core Equity Portfolio2
DFSIX
DFSPX
DFUEX
DSCLX
DFESX
36.69
22.64
37.08
22.35
-3.15
19.90
13.38
20.02
—
15.80
—
—
—
—
—
9.83
2.56
5.81
24.35
7.03
0.33
0.52
0.30
0.60
0.66
0.33
0.50
0.30
0.68
0.66
0.29
0.42
0.25
0.37
0.55
3/12/2008
3/12/2008
10/1/2007
11/1/2012
8/31/2006
1. Actual fees as of October 31, 2013.
2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to
the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses.
3. Assumed highest marginal tax rate in effect for capital gains and ordinary income. Income from funds managed for tax efficiency may be subject to an alternative minimum tax and/or any applicable state and local taxes.
#28230-0912
44
Standardized Performance Data & Disclosures
10 Years
Since
Inception
Net
Expense
Ratio1 (%)
Total (Gross)
Expense
Ratio1 (%)
Management
Fee
Inception
Date
0.99
1.22
2.08
3.66
3.05
5.77
1.66
—
1.87
—
3.71
—
—
—
—
2.20
2.24
3.15
3.60
4.67
—
2.00
—
—
—
—
—
—
—
—
5.16
3.64
5.57
5.81
6.72
5.25
2.06
-0.51
2.22
1.73
1.51
2.57
4.09
3.73
3.70
0.17
0.18
0.19
0.28
0.12
0.12
0.22
0.23
0.23
0.23
0.18
0.20
0.22
0.22
0.22
0.17
0.18
0.19
0.28
0.12
0.12
0.23
0.27
0.24
0.26
0.18
0.23
0.23
0.23
0.41
0.15
0.15
0.17
0.25
0.10
0.10
0.20
0.20
0.20
0.20
0.15
0.18
0.20
0.20
0.20
7/25/1983
2/9/1996
6/1/1987
11/6/1990
10/19/1990
9/18/2006
8/20/2002
3/1/2012
4/2/2007
11/29/2011
1/9/2008
12/6/2011
3/4/2009
7/20/2010
3/7/2011
—
—
-5.14
0.34
0.34
0.30
11/9/2010
As of December 31, 2013
Average Annual Total Returns (%)
Symbol
1 Year
5 Years
Fixed Income Portfolios
One-Year Fixed Income Portfolio
Two-Year Global Fixed Income Portfolio
2
Short-Term Government Portfolio
Five-Year Global Fixed Income Portfolio
Intermediate Government Fixed Income Portfolio
2
Inflation-Protected Securities Portfolio
2
Short-Term Municipal Bond Portfolio
2
Intermediate-Term Municipal Bond Portfolio
2
California Short-Term Municipal Bond Portfolio
2
California Intermediate-Term Municipal Bond Portfolio
2
Selectively Hedged Global Fixed Income Portfolio
2
World ex US Government Fixed Income Portfolio
2
Short-Term Extended Quality Portfolio
2
Intermediate-Term Extended Quality Portfolio
2
Investment Grade Portfolio
DFIHX
DFGFX
DFFGX
DFGBX
DFIGX
DIPSX
DFSMX
DFTIX
DFCMX
DCIBX
DFSHX
DWFIX
DFEQX
DFTEX
DFAPX
0.34
0.46
-0.45
-0.41
-3.52
-9.27
0.46
-2.05
0.65
-0.73
-1.11
-2.16
0.41
-3.81
-2.87
Commodities Portfolio
Commodity Strategy Portfolio2
DCMSX
-9.09
1. Actual fees as of October 31, 2013.
2. The net expense ratio applies to the indicated funds and takes into account a contractual management fee waiver and expense reimbursement agreement that currently is scheduled to remain in place through 2/28/2015. Please refer to
the prospectus for more complete information on advisory fees, expense reimbursements, and other expenses.
#28230-0912
45
Index Descriptions
Dimensional US Small Low Profitability Index was created by Dimensional in
January 2013 and represents an index consisting of US small cap companies. It is
compiled by Dimensional. Small is defined as the bottom 10% of the US total
market capitalization. Within small cap companies, Dimensional sorts stocks into
three profitability groups from high to low. Each group represents one-third of the
market cap of small caps. The index represents the returns of the low-profitability
group. It is rebalanced once per year.
Dimensional US Small High Profitability Index was created by Dimensional
in January 2013 and represents an index consisting of US small cap companies.
It is compiled by Dimensional. Small is defined as the bottom 10% of the
US total market capitalization. Within small cap companies, Dimensional sorts stocks
into three profitability groups from high to low. Each group represents one-third of
the market cap of small caps. The index represents the returns of the highprofitability group. It is rebalanced once per year.
Dimensional US Large Low Profitability Index was created by Dimensional in
January 2013 and represents an index consisting of US large cap companies. It is
compiled by Dimensional. Large is defined as the top 90% of the US total market
capitalization. Within large cap companies, Dimensional sorts stocks into three
profitability groups from high to low. Each group represents one-third of the market
cap of large caps. The index represents the returns of the low-profitability group. It
is rebalanced once per year.
Dimensional US Large High Profitability Index was created by Dimensional in
January 2013 and represents an index consisting of US large cap companies. It is
compiled by Dimensional. Large is defined as the top 90% of the US total market
capitalization. Within large cap companies, Dimensional sorts stocks into three
profitability groups from high to low. Each group represents one-third of the market
cap of large caps. The index represents the returns of the high-profitability group. It
is rebalanced once per year.
Dimensional International Small Cap Index was created in 2004 and is compiled by
Dimensional. The bottom 10% of market capitalization is included from each
Country. Countries are market cap weighted subject to a 50% cap. Before 1970, the
index is 50% UK and 50% Japan.
Dimensional International Low Profitability Index was created by Dimensional in
January 2013 and represents an index consisting of non-US Developed companies.
It is compiled by Dimensional. Dimensional sorts stocks into three profitability
groups from high to low (each representing one-third of the market capitalization).
The index represents the returns of the low-profitability group. The index is
rebalanced twice per year.
Dimensional International High Profitability Index was created by Dimensional in
January 2013 and represents an index consisting of non-US Developed companies.
It is compiled by Dimensional. Dimensional sorts stocks into three profitability
groups from high to low (each representing one-third of the market capitalization).
The index represents the returns of the high-profitability group. The index is
rebalanced twice per year.
Dimensional Emerging Markets Low Profitability Index was created by
Dimensional in April 2013 and represents an index consisting of emerging markets
companies and is compiled by Dimensional. Dimensional sorts stocks into three
profitability groups from high to low (each representing one-third of the market
capitalization). The index represents the returns of the low profitability group. It is
rebalanced twice per year.
Dimensional Emerging Markets High Profitability Index was created by
Dimensional in April 2013 and represents an index consisting of emerging markets
companies and is compiled by Dimensional. Dimensional sorts stocks into three
profitability groups from high to low (each representing one-third of the market
capitalization). The index represents the returns of the high profitability group. It is
rebalanced twice per year.
The Dimensional Indices have been retrospectively calculated by Dimensional Fund Advisors LP and did not exist prior to their index inceptions dates. Accordingly, the results shown during the periods prior to each Index’s index inception
date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical and is provided for informational purposes only to indicate historical
performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
Methodology used for computing profitability premiums: Dimensional controls for relative price (BtM) and size (market cap) when computing the annualized compound returns for high and low profitability stocks in US and non-US
developed markets and controls only for relative price in emerging markets. Profitability is measured as operating income before depreciation and amortization minus interest expense, scaled by book. Dimensional Index Data compiled by
Dimensional from CRSP, Compustat, and Bloomberg.
46
Index Descriptions
Fama/French US Large Growth Research Index: Provided by Fama/French from
CRSP securities data. Includes the upper-half range in market cap and the lower
30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July
1962 and Nasdaq equivalents since 1973).
Fama/French US Large Value Research Index: Provided by Fama/French from
CRSP securities data. Includes the upper-half range in market cap and the upper
30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July
1962 and Nasdaq equivalents since 1973).
Fama/French US Small Growth Research Index: Provided by Fama/French from
CRSP securities data. Includes the lower-half range in market cap and the lower 30%
in book-to-market of NYSE securities (plus NYSE Amex equivalents since July 1962
and Nasdaq equivalents since 1973).
Fama/French US Small Value Research Index: Provided by Fama/French from
CRSP securities data. Includes the lower-half range in market cap and the upper
30% in book-to-market of NYSE securities (plus NYSE Amex equivalents since July
1962 and Nasdaq equivalents since 1973).
Fama/French International Growth Index: 2008–present: Provided by Fama/French
from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the
lower 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI
securities data.
Fama/French Emerging Markets Growth Index : 2009–present: Provided by
Fama/French from Bloomberg securities data. Simulated strategy using IFC
investable universe countries. Companies in the lower 30% book-to-market range;
companies weighted by float-adjusted market cap; countries weighted by country
float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by
Fama/French from IFC securities data. IFC data provided by International
Finance Corporation.
Fama/French Emerging Markets Value Index: 2009–present: Provided by
Fama/French from Bloomberg securities data. Simulated strategy using IFC
investable universe countries. Companies in the upper 30% book-to-market range;
companies weighted by float-adjusted market cap; countries weighted by country
float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by
Fama/French from IFC securities data. IFC data provided by International
Finance Corporation.
Fama/French Emerging Markets Small Cap Index: 2009–present: Provided by
Fama/French from Bloomberg securities data. Simulated strategy using IFC
investable universe countries. Companies in the bottom 30% of aggregate market
cap; companies weighted by float-adjusted market cap; countries weighted by
country float-adjusted market cap; rebalanced monthly. 1989–2008: Provided by
Fama/French from IFC securities data. IFC data provided by International
Finance Corporation.
Fama/French International Value Index: 2008–present: Provided by Fama/French
from Bloomberg securities data. Simulated strategy of MSCI EAFE countries in the
upper 30% book-to-market range. 1975–2007: Provided by Fama/French from MSCI
securities data.
The results shown during the periods prior to each Index’s index inception date do not represent actual returns of the Index. Other periods selected may have different results, including losses. Backtested index performance is hypothetical
and is provided for informational purposes only to indicate historical performance had the index been calculated over the relevant time periods. Backtested performance results assume the reinvestment of dividends and capital gains.
47
Index Description
January 1994–Present: Dimensional Emerging Markets Large
Value Index Composition: Consists of large cap companies
whose relative price is in the bottom 30% of their country’s
large companies after the exclusion of utilities and companies
with either negative or missing relative price data. The
index emphasizes companies with smaller capitalization, lower
relative price, and higher profitability. The index also excludes
those companies with the lowest profitability and highest
relative price within their country’s large value
universe. Profitability is measured as operating income before
depreciation and amortization minus interest expense scaled by
book. The index monthly returns are computed as the simple
average of the monthly returns of four sub-indices, each one
reconstituted once a year at the end of each quarter of the
year. Countries currently included are Brazil, Chile, China,
Colombia, Czech Republic, Greece, Hungary, India, Indonesia,
Malaysia, Mexico, Philippines, Poland, Russia, South Africa,
South Korea, Taiwan, Thailand, Turkey. Exclusions: REITs and
Investment Companies Source: Bloomberg
hypothetical and is provided for informational purposes only to
indicate historical performance had the index been calculated
over the relevant time periods. Backtested performance results
assume the reinvestment of dividends and capital gains. The
Index is unmanaged and is not subject to fees and expenses
typically associated with managed accounts or investment
funds. Investments cannot be made directly in an index. Past
performance is no guarantee of future results.
The calculation methodology for the Dimensional Emerging
Markets Large Value Index was amended in January 2014 to
include direct profitability as a factor in selecting securities for
inclusion in the index.
The Dimensional Emerging Markets Large Value Index has
been retrospectively calculated by Dimensional Fund Advisors
and did not exist prior to April 2008. Accordingly, the results
shown during the periods prior to April 2008 do not represent
actual returns of the Index. Backtested index performance is
The indices are rebalanced semiannually and backtested performance results assume reinvestment of dividends and capital gains. Filters were applied to data retroactively and with the benefit of hindsight. Returns are not representative of
actual portfolios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower. It is not possible to invest directly in an index, which is unmanaged.
#34855-0813
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Yearly Observations of Premiums
Emerging markets
---Average
 Within 2% of Average
Return Premium
MARKET PREMIUM
80%
60%
40%
20%
0%
-20%
-40%
-60%
14.24%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Return Premium
VALUE PREMIUM
60%
40%
20%
7.06%
0%
-20%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SIZE PREMIUM
Return Premium
40%
20%
2.29%
0%
-20%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Emerging Markets Market Premium: Fama/French Emerging Markets Index minus One-Month US Treasury Bills. Emerging Markets Value premium: Fama/French Emerging Markets Value Index minus Fama/French Emerging Markets Growth
Index. Emerging Markets Size Premium: Fama/French Emerging Markets Small Cap Index minus Fama/French Emerging Markets Index. Emerging Markets returns are simulated by Fama/French from IFC and Bloomberg data and are freefloat weighted. In US dollars. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results.
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49
Summary of Portfolio Risk Management
Provides diversification and broad oversight with minimal style drift
Emerging Markets Strategies
Concentration
Risk
•
•
•
•
Highly diversified across countries
Country diversification leads to diversification across multiple currencies
Countries generally capped at 15% at point of purchase
Sector target weights typically capped at their approximate weight in a broadly diversified,
sector-neutral universe plus an additional 10%
• Industry groups generally capped at 25%
• Guidelines target a maximum 5% per issue at time of purchase
Implementation
Risk
• Team managed
• Approved exchanges only; ongoing evaluation of listing requirements, liquidity, and
settlement mechanism
Operational
Risk
•
•
•
•
•
•
Style
Risk
• Monitor characteristics of individual securities and overall strategy to prevent style drift
Charles River customized Order Management System
Comprehensive pre- and post-trade compliance
Independent accountant, custodian bank, and auditors
Independent mid-office in charge of trade processing
Independent SSAE 16 audit performed annually
Firm and subsidiary regulators include SEC, FINRA, FSA, ASIC, BCSC, MSC, BaFin, and OSC
Dimensional’s Investment Committee is responsible for creating investment guidelines specific to each portfolio. The Investment Committee considers the investment objectives and limitations set forth in each portfolio’s governing
agreements when addressing risk, and investment guidelines may be distinct between Dimensional-managed portfolios.
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50
Presenters’ Biographies
Joseph H. Chi, CFA
Co-Head of Portfolio Management and Vice President
Joseph Chi is co-head of Portfolio Management, chairman of the Investment Committee, and a member of the
Investment Policy Committee at Dimensional. Together with Jed Fogdall, Joe oversees Dimensional's global
portfolio management team, including US equity, non-US equity, and fixed income strategies. He is involved in the
design and marketing of new products and strategies, speaking frequently to current and prospective clients on
many investment-related topics. Joe joined Dimensional in 2005 as a portfolio manager on the international equity
team. Previously a securities and finance attorney, Joe specialized in venture capital, public offerings, and mergers
and acquisitions.
Joe earned his MBA from the Anderson School of Management at the University of California, Los Angeles, in 2005
with a concentration in finance. He is a CFA Charterholder who also holds a JD from the University of Southern
California and a BS in electrical engineering from UCLA.
Ted Simpson, CFA
Vice President
Ted Simpson, a vice president on the Institutional Services team, is responsible for developing and maintaining
relationships with public pension funds, foundations, endowments, Taft-Hartley plan sponsors, and corporate
pension and defined contribution plans.
Since joining Dimensional in 2002, Ted has held a number of positions within the firm. He began as a marketing
consultant before taking a leadership role in the firm's defined contribution market initiative. Later, Ted got involved
with Dimensional's consultant relations effort and eventually helped manage the group. Most recently, he has shifted
his attention to working directly with clients.
Prior to joining Dimensional, Ted worked for Salomon Brothers, Legal & General, Mattel, Lion Nathan, and a fee-only
RIA. He earned an MBA in marketing, strategy, and organizational behavior from the Kellogg School of Management
at Northwestern University, and a BA in politics and economics from Princeton University. Ted is a CFA
Charterholder and holds FINRA licenses 7 and 63.
51