Wei Dai: Fighting for Every Basis Point | Rational Reminder 306
Vložit
- čas přidán 14. 07. 2024
- Meet with PWL Capital: calendly.com/d/cpws-jyp-znp
Designing a robust portfolio requires considerable expertise, data, and experience. And while there are plenty of published articles that can guide how you build your portfolio, they are not investment solutions by themselves. Wei Dai is the Head of Investment Research and Vice President at Dimensional Fund Advisors, and she joins us today for a comprehensive and informative conversation on portfolio design for higher returns. Her background includes a Doctor of Philosophy degree in Statistics, Operations research, and Financial Engineering from Princeton. She has also earned a bachelor's degree in mathematics and applied mathematics from Zhejiang University. Her work has been published in multiple journals, including The Financial Analysts Journal. She has also collaborated on articles with esteemed figures such as Professor Robert C. Merton and Robert Novy Marx. In our conversation with Wei, we explore the contents of these articles, key findings from research conducted by Dimensional Fund Advisors, and how they are implementing this knowledge in their portfolios. We discuss the fundamental aspects of portfolio design, like expected return, risk, and costs, with Wei providing a detailed breakdown of each subject. There’s a lot to be learned from today’s conversation, and while things get pretty technical, you are in very capable hands! Tune in for a fascinating dive into the latest research on portfolio design and much more.
Timestamps:
0:00:00 Intro
0:04:46 The main risk premiums that Dimensional targets in portfolios
0:06:51 How the magnitudes of the expected size, value, and profitability premiums vary across regions
0:10:27 Some typical approaches to pursuing multiple premiums in a portfolio
0:12:41 The main trade-offs with these different approaches
0:19:54 Some of the ways to approach assigning individual security weights, given a desired level of factor exposure
0:22:43 How Dimensional approaches assigning individual security weights
0:30:42 How investors should decide whether to currency hedge their foreign asset exposures
0:35:13 Why timing exposure to the premiums is so tempting
0:40:31 The timing strategies that worked in Wei's research
0:48:27 The implications of this research when pursuing premiums
0:50:50 The importance of diversification to capturing the premiums
0:56:20 What investors should look for when choosing a systematic manager
1:07:09 How reversals are related to liquidity
1:12:20 How Dimensional uses all of this information in portfolios
1:21:22 Wei defines success in her life
Links From Today’s Episode:
Rational Reminder on iTunes - itunes.apple.com/ca/podcast/t....
Rational Reminder Website - rationalreminder.ca/
Rational Reminder on Instagram - / rationalreminder
Rational Reminder on X - / rationalremind
Rational Reminder on CZcams - / channel
Rational Reminder Email - info@rationalreminder.ca
Benjamin Felix - www.pwlcapital.com/author/ben...
Benjamin on X - / benjaminwfelix
Benjamin on LinkedIn - / benjaminwfelix
Cameron Passmore - www.pwlcapital.com/profile/ca...
Cameron on X - / cameronpassmore
Cameron on LinkedIn - / cameronpassmore
Wei Dai on Linkedin - / wei-dai-64a3071a
Wei Dai’s Academic Papers - papers.ssrn.com/sol3/cf_dev/A...
Dimensional Fund Advisors - www.dimensional.com/
Papers From Today’s Episode:
Assessing the Relative Magnitude of Premiums - papers.ssrn.com/sol3/papers.c...
Pursuing Multiple Premiums: Combination vs. Integration - papers.ssrn.com/sol3/papers.c...
Weighting for the Right One: Weighting Scheme Design for Systematic Equity Portfolios - papers.ssrn.com/sol3/papers.c...
To Hedge or Not to Hedge: A Framework for Currency Hedging Decisions in Global Equity & Fixed Income Portfolios - papers.ssrn.com/sol3/papers.c...
Another Look at Timing the Equity Premiums - papers.ssrn.com/sol3/papers.c...
Premium Timing with Valuation Ratios
How Diversification Impacts Investment Outcomes: A Case Study on Global Large Caps
How Diversification Impacts the Reliability of Outcomes - carlsoncap.com/wp-content/upl...
On the Valuation of Performance Fees and Their Impact on Asset Managers’ Incentives - papers.ssrn.com/sol3/papers.c...
Reversals and the returns to liquidity provision - papers.ssrn.com/sol3/papers.c... - Jak na to + styl
Wow, she is really sharp! I wish I could speak so clearly and fluently and English is my first language!
Yeah. Even though she has a heavy Chinese accent, her intonation is American. So, it's easy to understand what she's saying.
It's absolutely magical when the guest and topic is focused on factor investing. Like a reminder of why most viewers became a part of this community!
so true. They tend to drift too often away from what people came here for. Better to have fewer, more focused episodes, in my view. This is what we want.
What a wonderful guest!
This is another one of those I have to listen to a couple times. So much packed into it.
Incredible guest, excellent episode. Thank you.
Don’t be afraid to ask how to pronounce words from your guests! Her university in Zhejiang specifically in the intro is perhaps closer in our standard of English as “Juh Jawng”.
didn't understand anything but it was fun to listen to
The journey is the key to success and happiness, not the destination. It was said so well, good show.
I wonder to what degree it is harder for DFA to implement its trading approach in the ETF versions of their strategies compared to the mutual fund versions of their strategies? How much return is an investor sacrificing by buying the ETF versions of DFA funds?
Impressive guest. So much good information.
Great episode!! Impressive guest😎😎😎😎
Excellent listen. Thank you.
That was awesome, thanks guys and gal!!
Last question and answer re: success is gold!
❤❤❤ would be interested to know how the guest constructs her portfolio whether she uses the products her firm sells. Thank you
Incredible guest! I’m more convinced to buy DFA products - they’re miles ahead of the competition.
Does anybody get any actual actionable information from podcasts like these? Curious to hear which information you have used directly in your own portfolios.
I don’t get her point on not using factor funds in portfolio. So I shouldn’t use dimensional ETFs for large value, small Value, high profitability? And instead just invest in core funds? Why not use core funds, but add in the component funds for higher factor tilts? In fact dimensional core wealth plus model does this, so her points contradict that strategy
First ❤
And finished listening. Great episode. Hope to see more RR like these, as these are typically the ones I tune in for
Bland hosting. Guest was great tho.
Fantastic episode.
For all my fellow Canadian plebs without DFA fund access, hear me out:
Equities:
25% FCUV - fidelity US large-mid cap value
25% FCCV - fidelity Canadian large-mid cap value
25% ZGQ - Global large-mid cap quality stocks following msci all country quality index. Includes emerging markets.
25% VVL - vanguard global value developed markets. Includes about 30% small cap allocation.
For fixed income allocation:
Throw in VGAB to your preference. Vanguard global bonds hedged to CAD
scrutinize away. I might be a bit USA heavy
DFA ETFs expense ratios are too high! 0.27% (Ticker: DACE) vs 0.07% (Ticker: VAS) for Australian Equity
You can't see the forest for the fees! The managed fund version of DACE has beaten the ASX 300 (after fees) by 0.54% pa over the past ten years, factor in tax and it's even further ahead. DFA smashes index funds on tax efficiency.
@@sccroobyj4024 Where did you source this from? DFA0003AU since inception has return 6.60% annualised where the benchmark has returned 6.69%
It's really getting ridiculous with price sensitivity nowadays.... In the last we had active funds charging 1,x% or 2,x% and got index funds for 0,2% or 0,1%. Now people are complaining about those charges. Especially for multi factor ETFs 0,27% is not unusually high...
@@Martin-jm8wi Yep, and in Australia it's because clowns like betashares might be driving down fees on flagship funds, but that's only to loss lead for their high fee thematics. With DFA core, you're getting exposure to LVS for 0.28-0.36% with tax efficiency you couldn't achieve with indexes, nor three separate ETFs targeting those factors ie VGS VVLU VISM
@@sccroobyj4024 DFA etf in Aus has underperformed the benchmark in both hedged international and Australian equities looking at their website. Where did you information from?
Just buy XEQT
💪🏻🤩 yes sir!
XWD was here first… and better…