November 14, 2016 12:00 AM

Graphic: Dissecting Dimensional

Dimensional Fund Advisors began with the idea that using academic research to invest in smaller, underpriced companies with a tilt to profitability could outperform the market by avoiding subjective stock picking and the rigidness of pure index investing. The firm’s assets have grown significantly since the financial crisis as institutions look for low-cost active strategies that deliver alpha. It is the largest manager of quantitative strategies, strictly to institutional investors.

Healthy growth: Dimensional has grown its assets significantly as well as its investment offerings. Between 2005 and the end of 2015, assets under management grew 350%.

Added alpha: Long-term returns of the top funds by AUM have outperformed their peer groups and added alpha relative to their benchmarks.

Keeping costs low: Embedded in Dimensional’s process is minimizing transaction costs through its buy/sell discipline that avoids the costs incurred by index funds’ regimented rebalancing.

Buying in: Since 2005, DC funds have added $31.6 billion in exposure to Dimensional funds while DB plans have added $21 billion. Forty percent of the firm’s assets are institutional, with the remaining 60% from financial advisers.

Data are as of Sept. 30 unless otherwise noted. *Morningstar fee universes were used that include non-institutional share classes and will be biased higher. Sources: P&I Research Center; Morningstar Inc.; Bloomberg LP

Compiled and designed by Charles McGrath and Gregg A. Runburg