Dimensional Fund Advisors: Bhanu Singh on Factor Investing

**SPEAKER_1** (0:00)
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**Mitchell Sneddon** (1:27)
You may not have heard of Dimensional Fund Advisors, but you've almost certainly heard of the academic ideas that built them. Their founders and Nobel Prize winning advisors helped lay the intellectual foundations of modern finance, work that gave rise to index investing as we know it today. My guest is Bhanu Singh, the Australian CEO of Dimensional Fund Advisors, the world's largest active ETF manager. Dimensional story is remarkable, taking academic rigor and discipline into markets through a suite of funds and ETFs built on their core factors, which through decades of research have consistently delivered strong, repeatable outcomes for investors. This is not a story of luck or narrative, it's discipline, data-driven academic research translated into real world results. Our conversation starts with a roll call of the Dimensional Board and Advisors, many of whom are Nobel Laureates, and stick around for the end where I put a number of common market sayings to Bhanu to get his data-driven take. I love this chat and I hope you do too.

**SPEAKER_1** (2:31)
Hey there, here's a quick note. This podcast contains general financial advice only. That means it's not specific to you, your needs, goals or objectives, so don't act on the information until you've spoken with your financial advisor. You'll find our full disclosure, disclaimer, and link to our financial services guide in the show notes.

**Mitchell Sneddon** (2:49)
All right, Bhanu, I am going to list off a few names.

**Bhanu Singh** (2:53)
Sure.

**Mitchell Sneddon** (2:53)
And I would love for you to tell me why these people are famous.

**Bhanu Singh** (2:59)
Right. Right.

**Mitchell Sneddon** (3:00)
Eugene Fama.

**Bhanu Singh** (3:02)
Right. The father of modern finance and literally wrote the textbooks that we teach. We used to teach finance today.
He's known for two main things. There's a lot of things he's known for. The one, the most famous is his earliest work around this idea of efficient markets. And it was a framework to understand how markets work and how information gets priced into market prices. So when you trade, when you buy and sell a stock, you know, you often hear in the markets about there's more sellers than buyers or there's selling pressure or people are selling this stock and because it's overvalued. But then the question you should ask is, well, who's on the other side? Somebody is buying that stock because they think it's a good stock to buy.
So there's always two divergent views that causes a trade to happen. And Fama set up this whole framework around, well, how do we think about that and how does that, what does that mean for the market prices that we see every day? And his view was, and there was a whole sort of technical stuff around it, but mainly view is the most information we see out there in the world that's relevant to stock prices gets priced in. Markets do a very good job of pricing and information. So that means prices are a pretty good source for information about returns. We can get into what that means later on. And then the second piece is his paper with Ken French on cross-section of expected returns, where he established a three-factor Fama-French model. That literally changed how we talk about investing in it. You hear things like value funds, growth funds, small cap funds, large cap funds. That's all three-factor models. Right now it's five. There's a couple more factors added to it. But they established this whole framework, and that model became the bedrock of how we think about investing today.