Benjamin Felix

October 15, 2018

Episode 15: Brenda Bartlett: Dimensional Advanced Conference 2018

Benjamin Felix

October 15, 2018

Key Points From This Episode:

Eugene Fama [0:01:31]
The history of the University of Chicago and Dimensional [0:02:25]
Connecting economics with academia [0:02:25]
Behavioral finance is a branch of efficient markets (according to Fama) [0:04:23]
Crunching data for the first time [0:04:42]
Starting the first index fund – before Vanguard [0:07:01]
Volatility lessons [0:18:10]
Black swans [0:24:36]
Do you need a tstat of 3 in today’s world? [0:25:26]

Read the Transcript:

Ben Felix: This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision making for Canadians. We are hosted by me, Benjamin Felix and Cameron Passmore.

Welcome to the 15th episode of the Rational Reminder Podcast. This is a special episode that we're recording from Chicago and we're joined by PWL Capital's president, Brenda Bartlett. Thanks for joining us, Brenda.

Brenda Bartlett: Thank you.

Cameron Passmore: Bringing the show on the road.

Ben Felix: Yeah, the idea of today is that we spent all day yesterday and last night with people from Dimensional Fund Advisors, we're at their advanced conference as many of our listeners know, and we thought it would be cool to talk about some of the things that we learned yesterday while it's top of mind, because I'm sure lots of little details that we might forget as time goes on.

Cameron Passmore: And it's a good link to what Martin was saying last week in the podcast, talking about what has come out of academia changed his mind, as a guy that came from the active world and realize that there's a whole lot of merit in what's going on in academia. That's a good bridge.

Ben Felix: Yeah, it is. And there were quite a few talks we attended yesterday. There were really three, I guess, that spoke to me. So we'll try and talk about a couple of those as much as we can, but we got a history of the University of Chicago and how that ties in with Dimensional Fund Advisors, which was really interesting and then-

Cameron Passmore: Incredible school, incredible history.

Ben Felix: Oh, the story is crazy. Well, I think the highlight of the day for everybody was probably hearing Eugene Fama, who's obviously a Nobel laureate and the father of modern finance. He was here in person and spoke to the room in a casual chat format.

Cameron Passmore: It was cool. He had the Nobel laureate swagger so no matter what he says, everyone was impressed.

Ben Felix: Oh yeah. He had swagger. Every time he gets a question, he laughs before he answers it. It's like a swagger laugh. Like "Ha, this question again."

Cameron Passmore: And he works every single day of the year.

Brenda Bartlett: And he's almost 80?

Ben Felix: 79.

Brenda Bartlett: Yeah. So he's a pretty impressive guy.

Ben Felix: But you think about that. He's been studying capital markets since 1960. He arrived here for PhD.

Cameron Passmore: Every day. Every single day.

Ben Felix: So I do have some notes from the talk that I think it's interesting to walk through, but the University of Chicago was started by John D. Rockefeller and he started it with the stated intention of connecting economics with academia. He saw an opportunity to study economics and actually apply that to the real economy to improve the country.

Cameron Passmore: Apply research to real world problems.

Ben Felix: Yeah.

Brenda Bartlett: I think the first guy that they talked about was Milton Friedman, who I studied in economics.

Ben Felix: Everybody did. That's the [crosstalk] started listing off these names. Friedman Samuelson, Harry Markowitz, Merton Miller.

It's like the people who founded economics and finance.

Cameron Passmore: Meyerland Scholz.

Brenda Bartlett: Meyerland Scholz, Black.

Ben Felix: So all these people came through the University of Chicago and like you said, Brenda, you can't sit through a finance or economics course and not hear about these people. I think some of their-

Brenda Bartlett: Icons.

Ben Felix:... yeah. Even some of their textbooks are still in use. Do you remember whose textbook that was that they're still using [crosstalk].

Brenda Bartlett: Simonson.

Ben Felix: Simonson. Think it's in 19th edition?

Cameron Passmore: That's for sure. We all used it in economics.

Brenda Bartlett: And they had something like 34 Nobel laureates came from the University of Chicago.

Ben Felix: It was 30 in economics.

Cameron Passmore: No, 87, I wrote this down, 87 total Nobel laureates from the university. 34 of 84 of Nobel laureates in economics.

Ben Felix: Unreal.

Cameron Passmore: Were from Chicago.

Ben Felix: Unreal.

Cameron Passmore: And 24 Pulitzer Prize winners.

Ben Felix: Crazy.

Cameron Passmore: Yeah. So Ben and I went up to the Nobel Laureates Hall up on the sixth floor yesterday to see all the pictures of who has been awarded. When you see them all in one spot, it is unreal. And you go through so many of the names.

Ben Felix: Barack Obama was there right above Fama.

Cameron Passmore: Yeah. It's crazy.

Ben Felix: Richard Thaler.

Cameron Passmore: Thaler, yep.

Ben Felix: I mean, there's kind of a digression from the story, but we should talk about just briefly Eugene Fama, his comments about Thaler, which were pretty-

Cameron Passmore: Oh, it's hilarious.

Ben Felix:... funny. He said-

Brenda Bartlett: I wrote that one down.

Ben Felix: Do you remember what he said?

Brenda Bartlett: Yeah. He said-

Cameron Passmore: "Behavioral finance is a subset of the efficient market hypothesis."

Ben Felix: Yeah.

Brenda Bartlett: That's right.

Ben Felix: That's what Fama told Thaler that until you have a model, I'm calling you-

Cameron Passmore: A branch.

Brenda Bartlett: A branch. Exactly.

Cameron Passmore: That's it.

Ben Felix: So he said, "I'm the main guy." That was pretty funny.

Cameron Passmore: So the big takeaway that I got was really about technology and how... when Eugene Fama arrived here in 1960, that's when they brought in the first super computers, using the old punch cards and they're actually able to start capturing data of stock returns, which did not exist.

Ben Felix: They had the ability to do it and then one of the professors at Chicago went to Merrill Lynch and said, "It might be good for your business if you had a total market stock return data." Because at the time all there was was S&P 500. So Merrill Lynch said, "Sounds like a good idea." So they actually gave $200,000 as a grant to the university and that's how the CRSP, The Center For Research And Security Prices was born.

Brenda Bartlett: At the intersection, and then to find out that it was Myron Shoals, that was actually developing all the computer models and running the data for Fama while he was just a student doing...

Ben Felix: Oh, it's unbelievable.

Cameron Passmore: What do you think of how much data that is? All stock trading, going back to the twenties. For all NYSE stocks, unbelievable project.

Ben Felix: And they said when they were collecting the data, they didn't have computers powerful enough to process it. So they were gathering the data, hoping that computing power would catch up so that they could actually do something with it.

Cameron Passmore: And it was Gene Fama was really pushing hard to get this data because he wanted to do analysis-

Brenda Bartlett: Crunching the numbers.

Cameron Passmore: Crunch the numbers, to see what they could learn.

Brenda Bartlett: And up until then they didn't have a way to do it. So the technology arrived and-

Ben Felix: And so he starts testing with stuff like small cap. He couldn't even look at it before CRSP because all you had was S&P 500. There's no way to say, "Okay, what's S&P 500 done versus what has total market done versus what a small cap done," didn't exist. So in 1969, David Booth, who eventually founded Dimensional, came to Chicago to do his PhD. So he was studying under Fama and-

Cameron Passmore: His first class, first professor was Fama.

Ben Felix: Yeah.

Cameron Passmore: I guess that changed his world from that point forward.

Ben Felix: Yeah. They said that it shook his world. So, as he was studying and doing research, and I think he became Fama's teaching assistant, but he eventually decided he actually didn't want to stay in academia. So he told Fama this, "Like, I'm not going to continue," and Fama said, "Okay, well, I'll connect you with somebody in industry." So he connected him with Mac McQuown, who was at Wells Fargo at the time, I think.

Cameron Passmore: Yes.

Ben Felix: And then together they created the first index fund. So Booth and Mac McQuown at Wells Fargo created the world's first index fund and it was an equal weighted total U.S. market, right?

Cameron Passmore: For institutional investors, I think it was nothing retail yet. It was Jack Bogle a couple of years later that created the first retail product, I believe.

Ben Felix: And obviously what Jack Bogle did was amazing to release it to retail investors. But I thought it was fascinating because he gets all the credit for index funds. But the fact that Booth who people look at Dimensional, I think in a lot of cases, people think Dimensional is a relatively new company because they haven't heard of it maybe, but Booth who founded it, was the first person to create an index fund. But that was-

Cameron Passmore: Back in the seventies.

Ben Felix: So, eventually Booth decides that he's going to create the small cap fund and his reason at the time had nothing to do with higher expected returns because nobody knew that existed.

Cameron Passmore: Correct. That research had not been done yet.

Ben Felix: That's right. But Booth had seen from his work with institutional investors that people only had large cap exposure.

Cameron Passmore: Because he was a consultant at the time, right?

Ben Felix: That's right.

Cameron Passmore: He moved on from Wells Fargo, became a consultant, advising pension funds and realized they were all investing largely in large cap stock.

Ben Felix: So he pitched, I think to his employer at the time, or maybe it was to an institution... It must've been to his employer, pitched a small cap fund and they said, "No." So he was like, "Okay, I'm going to leave and I'm going to go build it." And he did and started pitching the product based on diversification, just telling institutions, "Listen, you're all large cap. I'm going to give you this product that gives you small cap exposure. And there's maybe some interest." And then Ralph Bonds who was Eugene Fama's student at the time, came to Fama and said, "Hey, I'm noticing this thing where small cap stocks tend to be doing better than large cap stocks." And so Bonds paper, that was the first time the small cap effect was identified and obviously Fama and French built on that later but Bonds was the first person to document it.

So then that becomes part of Booth's pitch as he's building his new product. It's not just diversification, it's like, "Hey, we're actually noticing that small cap stocks in the data perform better than large cap stocks."

Cameron Passmore: But he created the product just for diversification, not to get the small cap factor.

Ben Felix: That's right. The small cap factor came later.

Brenda Bartlett: When you look at the story that the [inaudible] there's a lot of catching up. The ideas originally were about diversification. But then as technology caught up, as the factors were being revealed, then there was more enlightenment.

Ben Felix: Yeah.

Cameron Passmore: But you think about [crosstalk] We talk about factors. Link every episode. Back then there were no factors. It was just becoming known that it was very hard to beat the market, which was one of the propositions put forward by Fama, the efficient market hypothesis. That was just being developed at that point.

Ben Felix: That was Fama's dissertation. The birth of the EMH was his dissertation when he was studying at the university. And who was it that reviewed his dissertation? Was that Merton Miller?

Cameron Passmore: I believe so.

Ben Felix: I believe it was as well, but it was, [crosstalk].

Brenda Bartlett: It was Miller.

Cameron Passmore: So Fama came to him with five ideas and Miller was like, "No, this one's crap. This is crap. This is crap. Oh, this one. This one might have some legs." [crosstalk]

Brenda Bartlett: And that's when Fama was in Europe for a couple of years. He said, "I could have saved all this time. I wrote all these five papers. And if I'd only talk to Merton Miller first, he would have saved me a lot of time."

Ben Felix: [crosstalk] not gone to Belgium and would have been further ahead in my career. Well, that's one of the things they talked about. The culture at the University of Chicago is, I don't know, they didn't say it was cutthroat, but it sounds just ultra competitive and ultra direct.

Cameron Passmore: Direct feedback.

Ben Felix: Yeah. Which is another interesting part. But that was Fama's comment that if he'd been at Chicago, someone would have told them it was crap a long time ago, as opposed to spending any time on it. So in 1991, Ken French came to the University of Chicago. So obviously people know now the Fama French three factor model, but it wasn't until 1991, that French came to the university and the really interesting thing is it ties into Dimensional, is that Fama French start doing their research. They start pulling together all of these other papers and finding, "Okay, there's the size effect and there's a value effect." They're plugging away doing the research before they've published anything. So this isn't common knowledge yet. They've talked to Booth about it. And Booth had actually launched a value product based on that research prior to them releasing anything.

So that, to me, it was like, "Wow," and I hate sounding like a Dimensional promoter or a groupie or whatever, but it's unbelievable. They are so tied into the research that before things are published, they're implementing it in-

Cameron Passmore: Because DFA at that point, Dimensional was 10 years old at that point because they were founded in '81. So this was long before factors were a thing. They were doing the diversification story and it was a fledgling company for much of that decade.

Brenda Bartlett: I've heard over the years, I've heard David Booth speak at these conferences and he's very humble. And he talks about being a student of Gene Fama, but he also talks about not continuing at the University of Chicago because he didn't have the marks and Gene was sort of frowning at him. But I think that might be just David Booth's humility. And when he went on, he really is very humble about how the firm started and the first 10 years he said were pretty lean. There were no factors. There was no evidence around what he was launching and so he said it was a tough grind.

Ben Felix: Well, he tells the story of the first 10 years, how he launched the small cap product and then small caps underperformed for 10 years.

Cameron Passmore: For a decade.

Brenda Bartlett: Yeah. It was lean.

Ben Felix: Yeah. He does say that he still got buy-in because the institutions that were buying the product, they got that there was a reason to it. And at the time there was data on small caps. So they were like, "Okay, we're bought into this strategy." So anyway, that was the sort of the history of Chicago at the University of Chicago and Dimensional, how those things tie in so closely together. But it's just amazing to think that Dimensional, yes, it's a fund company, yes, they do sell products, but they've been tied in with Modern Finance since before Modern Finance was Modern Finance. Like all of these guys who sat on the board of Dimensional- [crosstalk].

Cameron Passmore: Merton Miller and Myron Shoals became directors because they needed directors-

Ben Felix: It's crazy.

Cameron Passmore:... for the fund company. So just went down the hall to the university and said, "Would you do it? Would you do it?" And those two giants said, "Yes."

Ben Felix: They weren't giants at the time. That's the crazy part about it. Brad mentioned yesterday that I think it was Shoals, is either Miller or Shoals, told Booth, "I don't think this is going to work because I think you're going to get killed in implementation costs, but it looks like a fun experiment, so yeah, I'm in. Crazy. And that obviously Dimensional has gone on to prove that with the way that they implement products they are able to capture the premiums after costs.

Brenda Bartlett: But going back to the icons that have come out of the University of Chicago, at the end of this sort of a history, they went through Miller, Markowitz, Sharp. Already we've talked about Shoals. It's pretty impressive. I mean, you can't help, but-

Ben Felix: The most impressive thing about it is that these guys were part of Dimensional before they were who they are. It's not like Dimensional went and found all these Nobel prize winners and said, "Hey, do you want to join our company?" It's like, they found the people with the best ideas at the time who ended up being central-

Brenda Bartlett: So really it becomes like a validation because all of these people were involved with Dimensional, David Booth, Gene Fama, before they became the juggernaut that they are today and they all were recognized for their work from the Nobel Institute afterwards.

Ben Felix: Right.

Cameron Passmore: And even I've heard Gene Fama in past presentations say, "This information was coming. I just happen to be the right guy at the right spot at the right time with technology. These factors would have been discovered eventually." But to have it all happen with his group at this university-

Brenda Bartlett: Well, it's like an incubator. It's the intersection of economics and finance and...

Cameron Passmore: And in the real world application with Dimensional.

Ben Felix: So that was all really interesting. Now that was not Fama speaking about the history. They actually had an employee at Dimensional who was previously a history teacher who went to Stanford. The guy was a fantastic speaker. So he delivered that talk. But the talk after that was Eugene Fama being basically interviewed by Marlina Lee. What's Marlina's title at-

Brenda Bartlett: Marlina is co-head of research.

Cameron Passmore: She's the co-head of research.

Ben Felix: So I had dinner with Marlina and I'll talk about that with a group of people. We'll talk about that maybe as we go along, but Marlina... I was asking her questions that.. I wasn't trying to stump her, but I had a lot of burning questions, just research that I've read from other sort of quant companies like AQR and just other things that have come up over time and every single question that I asked Marlina, she had just an unbelievably rock, solid answer, like, "Oh yeah. Well, we looked at that two years ago and here's what we found." And I'm like blown away, not just by the fact that they've already looked at it, but by the quality of the answers and I couldn't name a paper that she wasn't familiar with. That was even crazy.

Like I was listing off... I spend more time than I probably should reading academic papers, but every single one that I mentioned to Marlina, she had read, like, read the whole entire thing and had a response. It was impressive. Anyway. So in Fama's talk, he was actually talking about a paper that him and Ken French recently released. It was published in the Financial Analyst Journal and I guess as a funny little aside, Fama said that they butchered his paper, the editors of the paper, butchered it in-

Cameron Passmore:... past tense?

Ben Felix: Yeah, they put it in past tense, which is apparently a great sin in Fama's eyes. So him and French re-released the paper on SSRN in the way that they had wanted it to be. That was kind of funny, but the paper is great. We read it as a firm when it came out and hearing Fama explain it, I mean, it's this guy who won a Nobel prize, just came up with a new paper that is very interesting. And hearing him walk through the paper in person, to me, it was amazing. I mean, his ability to explain the concepts was unbelievable as well.

Brenda Bartlett: But that's one of the advantages of these conferences. We're here in Chicago and it's because you have access to these huge thinkers. These people are leaders in economics and you would never have this experience anywhere else.

Ben Felix: Right.

Cameron Passmore: And you could tell he wanted to get back to his desk to do work. As soon as he was done-

Ben Felix: Gone.

Cameron Passmore:... he was gone. Like he was on a mission to get work done. He wasn't about to linger.

Ben Felix: So the paper, which we can link in the show notes, it's called Volatility Lessons and they built a statistical model using the bootstrapping technique to create these massive data samples. So they basically took monthly returns going back to 1963 through 2016 and bootstrapping means that they took all those monthly returns and then they took a 100,000 samples from that set of returns with replacement. So that means the way Gene described it, if you take a bucket, dump all of the monthly returns from 1963 to 2016 in the bucket, take one out, that's your first monthly return on your data series. And then you put it back in and then you take another one out. And so they did that a 100,000 times for monthly, yearly, 5, 10, 30 year-

Cameron Passmore: 20 and 30 years. That's right.

Ben Felix: Time periods.

Cameron Passmore: That was with the premiums right?

Brenda Bartlett: That's right.

Cameron Passmore: The difference in the return of the equity markets over T bills for the month.

Ben Felix: Correct.

Brenda Bartlett: That was the first series they did.

Ben Felix: Correct. So they looked at market, they looked at market value over market. They looked at big value over market, small value over market. So all of these different factor exposures, but because it becomes such a large data sample, you can look at how the distribution of outcomes changes as you progress to longer periods of time. So how does the data look over monthly periods? How does it look over annual periods? And the main observation I think is that over long periods of time, you end up getting more of a skew on the right. So you end up with more positive outcomes as you go along through time. So over longer periods, you're more likely to get a positive outcome than a negative outcome. But somebody asked Gene during the talk or after the talk, does this mean the time diversification works?

So does this mean they don't have a longer period of time you're reducing your risk? And Gene did his Nobel laureate laugh, but he said that, "Well, your probability of a negative outcome over long periods of time decreases. The magnitude of those negative outcomes actually increases." So over a 30 year period, if you lose, you might lose a lot, even if that's less likely than winning. But that becomes the story of the equity premium where over longer periods of time... but the crazy thing was even over a long period of time, you still had the equity premium. What was it? 4% or-

Brenda Bartlett: 4% at 30 years.

Cameron Passmore: 4%.

Brenda Bartlett: Of a negative return.

Ben Felix: 4% probability of a negative return.

Cameron Passmore: A negative premium.

Brenda Bartlett: Negative premium.

Cameron Passmore: Right. Correct.

Cameron Passmore: The return can be positive as the difference between-

Ben Felix: Correct.

Cameron Passmore:... equity and the one month [inaudible] -

Ben Felix: And the [inaudible]. Yeah, that's right.

Cameron Passmore: But still over 20 years, the equity premium can be negative. What is negative 7.8% of the time? Even if it wasn't that way, there would be no premium.

Brenda Bartlett: That's right.

Cameron Passmore: Because it is risk.

Brenda Bartlett: That's right. There has to be a delta.

Ben Felix: That's exactly what he said. He said, if there were a 0% chance of a negative outcome, then the prices were wrong.

Brenda Bartlett: Yes.

Ben Felix: Yeah.

Cameron Passmore: And he talked about risk, which wasn't really statistical at all. Total risk of war, risk of having assets repossessed, which I [crosstalk] was so interesting. That's kind of real world practical.

Brenda Bartlett: That's right. He kept talking about, let's talk about real-world. There's statistical and then there's real world. And I think the expression that he used was, "Nominal and average returns." Those are all great for our statistical models, but we eat real returns. So let's talk real returns. And then he talked about currency wherever you live. And he did talk about that, Cameron, about the risk of war was not factored into the data because as you diversify across different countries and regions-

Ben Felix: Well, it's the risk of expropriation. But I want to tie back to the thing that you were just mentioning, Brenda, on the average return versus the return.

Brenda Bartlett: The real return.

Ben Felix: So we're talking about the risk question that he laughed about. He said that the risk of the average return decreases, but the risk of the return increases and you eat the return. I was like, "Oh wow. That's an interesting way of thinking about it."

Cameron Passmore: Because in the 30th year you could have a very serious negative return. You're not guaranteed safety for two years.

Brenda Bartlett: That’s right. There were lots of questions about in retirement, what does this mean? What does this mean for us to give advice to people planning for retirement? And one of the things which I did not ask was it's the order of the returns in retirement that will define whether you have a positive retirement experience or a negative retirement experience.

Cameron Passmore: You give a lot of respect for owning fixed income.

Brenda Bartlett: That's right.

Cameron Passmore: We get asked a lot, "Well, why would I own any bonds?" We have a whole generation of investors post-2008. They've never really seen volatility, so.

Ben Felix: Yeah. Yeah. That whole conversation was fascinating.

Cameron Passmore: But the other things you said, political risks are undiversifiable.

Ben Felix: Yep. He did talk about that. That was interesting.

Brenda Bartlett: And he talked about it also not even being quantified yet, political risk. And he says, "I don't think there's been anybody who's actually tried to quantify that risk.

Ben Felix: Right.

Cameron Passmore: And then he also talked about liabilities and public pension plans here. He said, "[crosstalk] basically did you use the word criminal?" But he said, "You can never do this in private enterprise and-"

Brenda Bartlett: Not go to jail.

Ben Felix: I think he said criminal. I think he said, if you did do the type of accounting that public institutions do as a private entity, you would go to prison.

Cameron Passmore: Because pension liabilities are three times larger than what our actually stated, which is a huge problem.

Brenda Bartlett: In their reporting they use a very high discount rate which is way overstated, so.

Ben Felix: I think one of the other really interesting things that he said on the topic of risk is that Marlina asked him about black swans. So his answer was that black swans do occur in monthly and annual returns, but they go away over long periods of time. So like majorly negative events, they don't tend to show up in the very long-term data.

Cameron Passmore: What'd you think about his comments when someone asks him about the factor zoo and the fact that there are now over 400 different factors?

Ben Felix: What did Gene say?

Cameron Passmore: He basically said they're all spinoffs of the main ones that they have found with is profitability, value and size.

Ben Felix: Yeah. Yeah. I've read similar things in other literature. I think Larry Swedroe has written about that too.

Cameron Passmore: And you talked to Marlina about that last night, I think. Right.

Ben Felix: Well, so one of the things that I asked her about was Campbell Harvey, who's another academic who, I'm not always a fan of what he writes, but he came with a paper, I think it was this year where he says that to be a robust factor today, based on how many factors are coming out and how much research is being published, a T stat of two, which used to be sufficient to be statistically significant, Campbell Harvey wrote a whole paper, which I didn't read the whole thing to be honest, but I read the abstract. He's basically saying that you need to a T stat of three in today's world, because there are so many factors. So I asked Marlina about that and she, of course, read the paper and she laughed and she said that's only true if you're not doing robustness tests in other ways.

So if you're just testing random stuff in the data but may not have a sensible explanation, then yeah, you might need a T stat of three. But if you're doing what Dimensional is doing and the way that they vet their research in ways more than statistical models, then you don't need the T stat of three. Because if you look at small cap, one of the things Campbell always says is that small does not have a T stat of three. So therefore he doesn't believe that it's a real premium. Now AQR wrote about that and I talked with Marlina about this too, but AQR wrote about the size premium. They agree that, yes, it's not statistically significant, but when you control for profitability and size, now profitability and relative price in the small cap universe, then the T step becomes very strong again and Dimensional has been doing that for, of course, years.

It's the small cap growth anomaly, which is explained by profitability. But anyway, DFA is looking at all that stuff. So when you're not looking at all the other stuff, Marlina says, "Yeah, you might need a T stat of two but why would you not be looking at the other stuff? If you're producing a factor that's not sensible and with a T stat of three, is that enough? Maybe not.

Cameron Passmore: So I'm curious, Brenda, so you've been in the industry a long time [crosstalk] large organizations, led many advisors over the years, what's your takeaway now that you've been in this environment for, I think you've been with us for over 10 years now. How do you view what this is about?

Brenda Bartlett: So interestingly, we talked about it before starting the podcast was that Dimensional is a best kept secret if you will, in the broader industry. And when I came to PWL and heard about Dimensional, that was really the first time. My takeaway is learning about everything that they do and seeing over more than a decade at PWL how they have actually evolved at Dimensional, not only have they grown spectacularly, but they have evolved how they deliver their advice and their support to advisors. Their research is incredibly robust and Ben just talked about that, that you have to look at factors. You have to look at any statistical element you're trying to examine. You have to look at it from so many perspectives. Looking at it through one lens is not sufficient. So they're super robust on all of this research.

I can't say that other firms are less robust or more robust than Dimensional, but certainly the way they expose it to advisors and are happy to show it and bring the people that actually do the research in front of the advisors. They've got nothing to hide, nothing to hide. Put Gene Fama out there, get Ken French out there. We've been exposed to Bill Merton too. So, Robert Merton. So that's one thing. Their research is super robust. They've evolved over at least a decade. And maybe it was the global financial crisis. They've evolved their conferences in how they give their support and advice to advisors from really technical investment advice, all about capital markets, the Fama French model to... that's still important. But now that most people have actually understood it and learned it, and it's become a lot more mainstream, as you say, the proof of that is there's this proliferation of factors out there. Well, people have hitched their wagon to these factors and are inventing factors, but the core factors of the Fama French model are the foundation of it all.

So they've evolved it from technical investment research to more practice management and communications because one of the discussions we had last night was how Dimensional is really spectacular at communications and they help advisors with the communications. It's not so much helping them explain the factor model. It's helping them continue to explain to regular investors why this is a robust model and how this is good for them. So that's one of the ways of I've seen them evolve over 10 years.

Cameron Passmore: Have you seen the MBRs drop over the years as well, which they show?

Brenda Bartlett: Exactly that's unusual because usually every fund company is out there to continue to maximize their own profits. So, you don't see that from other fund companies.

Ben Felix: The big thing would depend like, yes, there are so many other factor products out there, but Dimensional's built this crazy mote of their ability to implement, which is probably the hardest part of factor strategies. One of the things that came up at dinner last night was Manulife's multi-factor ETFs that they've launched in Canada, which track an index that Dimensional has created. So Marlina had interesting comments about that too, which is basically that Dimensional gives them the index, but it's up to them how they implement. They may not follow the index exactly. It's up to them when they trade, all that kind of stuff. And we've talked about in the past on the podcast. We've run regressions on those multifactor ETFs and the factor tilts are non-existent as far as I can tell in regression, at least not statistically significant. Yeah. Anyway.

Cameron Passmore: We can see Marlina today again. That should be interesting.

Ben Felix: Yeah. I think that's probably it.

Cameron Passmore: That's it. It's a great conference so far and [crosstalk] Next week.

Brenda Bartlett: Yeah. Thanks for inviting me.

Ben Felix: All right. That's it.