To me, Dimensional is the pinnacle of investment excellence.
This is my attempt to tell the story of your investment portfolio. I want to give you, the investor, an understanding of the craftsmanship, quality, and historical significance that comes with being a Dimensional investor. If you are like most, then before coming to Camber, you will not have heard of Dimensional. That has always been a deliberate choice by the company and its founders.
They are unique in that way - quietly prestigious. Their peers spend countless millions on marketing in the hopes of becoming a household name. Dimensional forged a different path. Forgoing marketing and instead allocating available dollars to research, technology, and improving the quality of their portfolios. Their value is based on principles that are defensible over one hundred years of data, and proven over 40 years of successful implementation.
To me, Dimensional is the pinnacle of investment excellence.
I have the deepest respect and admiration for Dimensional. I have owned and studied hundreds of investments over my career and, as a purveyor of investments, nothing has held my eye or attention as has Dimensional.
When my sister had her first child, it was a Dimensional portfolio that my wife and I bought for her. And from now until the day she requires that capital, whether it's for a need or a dream, that portfolio will work tirelessly to increase in value.
The principles that drive its growth are forever lasting, grounded in sound principles, and engineered with absolute precision.
Dimensional: A Storied History
Dimensional's origin story began in the classrooms of the University of Chicago. A chance encounter between an eager PhD student, David Booth, and his finance professor—now Nobel Laureate—Eugene Fama.
Booth was astute to the powerful ideas that were coming out of Fama's research - scientifically sound ideas that could reliably enhance investment returns. But these great ideas hadn't been translated from academic work into real-world investment portfolios. Booth decided to work towards bringing these ideas to life.
His journey started at Wells Fargo, and under the mentorship of Mac McQuown, he had the tremendous fortune to work with financial legends Myron Scholes, Fisher Black, and many others. Together, they created the first index fund in 1971, five years prior to Vanguard’s Jack Boggle, who is often credited with its creation.
The Index Fund
The index fund was the first major investment idea to come out of empirical research. Their invention created an enormous benefit for investors – a low cost, broadly diversified portfolio with attractive returns. To this day, index funds provide an effective investment approach, vastly superior to that of traditional stock picking and active management.
But index funds are rigid in structure, simplistic in composition, and lack the nuance of a more finely engineered investment product. To improve upon indexing, Booth founded Dimensional in 1981 from the spare bedroom of his Brooklyn, New York apartment.
Booth knew from all his research that stock prices contained information, and such information could be used to manage risk and increase returns. Dimensional's first fund had two revolutionary components within it. Those components remain core pillars of the firm to this day.
Their first great innovation was to tilt away from the index, weighting their portfolio to areas of the market that have greater return potential. They did this by allocating their portfolio towards small company stocks.
Small stocks are priced differently than large stocks, and the price difference results in a superior return, averaging an incremental ~3% annually. Theoretically, this makes sense, as a rational investor would need to be compensated for taking on the additional risk of buying stocks in small, unestablished companies, as opposed to large, noteworthy ones.
The second great innovation was focusing on portfolio implementation and construction. Their competitive advantage comes from building portfolios methodically, balancing trade-offs, minimizing costs, and remaining regimented and disciplined. They corrected for the mechanical and operational deficiencies that exist in the construction of a basic index fund.
Throughout Dimensional's 40-year history, new discoveries around risk and return have come to light. Methodically, Dimensional expanded their portfolio tilts to also include value companies and highly profitable companies. These enhancements have always come after deep research and are implemented with precision; if Dimensional is going to do something, they do so at the highest level.
Through tilting and efficient portfolio implementation, Dimensional has been elevated to the archetype of portfolio science. They forever changed the landscape of the investment industry and continue to be known as a company that develops innovative solutions that benefit investors.
Dimensional has earned a place in history, and its people are a big part of that story.
The roster of Nobel laureates and distinguished researchers who have worked with the firm and remain committed to them to this day is almost unfathomable. If you studied finance formally, as I did, then Eugene Fama, Ken French, Robert Merton, Robert Novy-Marx, Merton Miller, and Myron Scholes are the names, papers, and titans of industry you have studied. They are inescapable, as they created the source material of modern finance.
Dimensional's people continue to be impressive, grooming a new wave of financial thinkers. Gerard O'Reilly, one of Dimensional's co-CEOs, is an Irishman with a PhD in aeronautics and applied mathematics. Dave Butler, Dimensional's other co-CEO, stands over 6 foot 8 inches and, before beginning his 27-year tenure at Dimensional, was a Boston Celtics draft pick and Merrill Lynch investment banker.
Savina Rizova is their Global Head of Research. She came from humble beginnings and lived under communist rule in Bulgaria. By borrowing the SAT textbooks from the library—when they could be found—she earned full financial aid from Dartmouth and later completed her PhD in Finance from the University of Chicago.
Dimensional is comprised of an army of highly talented PhDs and finance professionals doing research and ceaselessly thinking about portfolio construction, design, and implementation.
Dimensional has built a culture grounded in authenticity and decency, and these core tenets run deeply through their people. They work honestly and genuinely for their end investor. An important example of this is their management fees - the cost you pay to be an investor.
From the beginning, Dimensional has been committed to delivering a low-cost product. As their business grows, they continually lower the costs to investors and have done so as recently as 2019 and 2021.
A luxury product, crafted with correctness, rich in history, but not priced that way. The average fund in Canada charges three or four times more than Dimensional while having nowhere near the sophistication or workmanship behind it.
Dimensional does things differently, and not charging high management fees is one of those important differences. Such a strategy would go against their fundamental values and the simple arithmetic of investment performance. Within the flawed and deceitful money management industry, it is refreshing to know a firm like Dimensional exists.
Forty years ago, they started with a handful of investors, and today they manage over $800 billion dollars of investment capital - quietly one of the largest money managers in the world. Among their investment base are global pension funds, governments, world-renowned scientists, celebrities, and individual investors, just like you.
The intersection between Camber and Dimensional
Camber’s standards for financial excellence would not be possible without companies like Dimensional. Similarly, their full value would not be unlocked without the work we do at Camber.
Our work lives in the details and in lifelong relationships. We tailor our advice and task execution to each client’s unique goals and objectives, and through our dashboards, provide tools for informed decision-making.
Importantly, Camber is not beholden to Dimensional and receives no compensation or incentives to use their products. While we are grateful to be among one of their select providers, we remain unbiased in our selection process.
We work for you, our client, and not for investment houses. We have selected Dimensional after a thorough examination of the investment landscape, but this research is ongoing and a continual exploration of our fiduciary duty to put the best ideas forward.
For as much of my life as I can remember, I have been fascinated by financial markets. I have studied them, experimented with them, loved them, and been beaten down by them. At this point, I know how to navigate their waters and how to avoid the mistakes of my past. My money, and my family's money, is invested with Dimensional, which enables us to grow what we have sacrificed to save.
I love finance, but my son, daughter, and niece might have other interests and take different paths in life and career. What brings me comfort is that they don't need to know, care about, or understand finance as I do. They can capture all the benefits by simply staying the course, investing their savings, and allowing their Dimensional portfolio to grow. That frees them to focus their efforts on what brings them joy while knowing that they, too, will be okay. The same is true for you, as a new Dimensional investor.
I hope these words have given you a greater sense of confidence in your investment decision, so you can share in the feeling of gravitas that comes from being an informed investor. When Camber places a Dimensional order on your behalf, you have tremendous power behind you; the investment component has been taken care of at the highest level of excellence. Now it simply comes down to staying invested.
Rob Townsend, CEO Camber Private Wealth
Interested in learning more about Camber’s investment approach? Be sure to read our article detailing the science behind our portfolios. An example portfolio can be viewed here that includes details on portfolio weightings, top holdings, and historic performance.
You can also listen directly to interviews with the Dimensional leadership on the Rational Reminder podcast.
o David Booth, Founder
o David Butler, co-CEO
o Gerard O’Reilly, co-CEO