DFA Emerging Markets Value Portfolio

Class Retirement (DFEPX)
Scorecard
2 / 5 Stars
Lipper
2 2 1 4 1
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
3 / 5 Stars
TheStreet.com
E- (Sell)

U.S. News evaluated 206 Diversified Emerging Mkts Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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See full Diversified Emerging Mkts rankings

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Note: Profile written for different share class.

Performance

The fund has returned -3.82 percent over the past year, -5.82 percent over the past three years, 15.00 percent over the past five years, and 11.55 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date -0.8%
1 Year -3.8%
3 Years (Annualized) -5.8%
5 Years (Annualized) 15.0%
10 Years (Annualized) 11.6%

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Summary

DFA Emerging Markets Value I fund isn’t trying to beat the market. Like other funds offered by Dimensional Fund Advisors, this one seeks to instead provide investors with concentrated exposure to a particular area of the market—in this case emerging market value stocks.

As of April 22, 2014, the fund has assets totaling almost $18.59 billion invested in 2,194 different holdings. Its portfolio consists of an enormous basket of stocks that represent all industries and company sizes in the emerging markets. Stocks in the portfolio have low price-to-book ratios. This ratio compares what the company’s stock price to the value of the company’s total assets if sold today.

DFA views its method as scientific investing. The company follows University of Chicago Professor Eugene Fama’s theories on “equilibrium” investing. Rather than trying to predict movements in the market or pick individual stocks, lead manager Karen Umland manages a team of researchers and traders that deal only in value ratios within a large basket of equities. By buying a diversified portfolio of value stocks and only selling when a stock’s price-to-book value grows out of the category, the fund limits the human impulse to time markets or make bets on a hunch. The only actively managed part of the operation is that traders are given large selling windows, often several months to close a position.

With about 2,000 stocks, the fund acts similar to an index. It differs from the MSCI Emerging Markets Value Index by allocating no more than a 12.5 percent of assets to any one country, which limits positions in Brazil and China. The fund’s holdings are weighted based on capitalizations, with larger companies getting larger portfolio stakes. It is widely diversified among company sizes, holding large allocations of both micro-cap and mega-cap stocks. The fund has returned -3.82 percent over the past year and -5.82 percent over the past three years.

Although the fund is ranked first among all diversified emerging market funds, DFA’s vice president, Weston Wellington, attributes its performance to the market rather than managment: “Yes, it’s true that value stocks have outperformed a broad market basket of stocks, but that’s a function of the time period and doesn’t mean that value stocks will always outperform.” The fund has returned 15.00 percent over the past five years and 11.55 percent over the past decade.

Investment Strategy

Management locates the cheapest 25 percent of stocks, based on price-to-book ratio, in all emerging markets. Then they cut out companies with regulated profits like utilities. Management also only buys American or Global Depositary Shares. They only sell a stock once it no longer fits the fund’s value criteria. Managers don’t sell positions themselves. Instead, they give a separate group of traders a large selling window — as much as four months —  to exit a position in order to reduce trading costs.

Role in Portfolio

Morningstar recommends the fund play a supporting role in your portfolio.

Management

This is one of several emerging market funds run by Karen Umland. She has managed the fund since early 1999. Portfolio manager Stephen Clark has been with the fund since 2001. Joseph Chi and Jed Fogdall have been co-managers since 2005 and 2004, respectively.

Fees

DFA Emerging Markets Value Portfolio has an expense ratio of 0.82 percent.

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Risk

The fund’s large holdings in emerging market small- and mid-cap value stocks present two possible risks. These stocks tend to be more volatile than their large-cap brethren, and small-cap value stocks can be left behind when growth or large-cap stocks lead the market. Additionally, individual emerging market economies tend to succumb to larger market swings than developed economies.
 

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 5 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 4 for one year, 4 for five years, and 2 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-04-10

The fund's Value Line Risk Rank, a measure of volatility, is 5 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-04-10

In the annual Lipper/Barron’s Fund Families Survey of 2010, Dimensional Fund Advisors ranks first out of 57 fund families surveyed.

Lipper 2011-04-19

In the annual Lipper/Barron’s Fund Families Survey of 2010, Dimensional Fund Advisors ranks first out of 57 fund families surveyed.

Lipper 2011-04-19