Gerard O’Reilly: Deep Dive with Dimensional’s co-CEO & CIO (EP.198)

<p>You don’t need to be a rocket scientist to work at Dimensional Fund Advisors, but Gerard O’Reilly sees it as an asset, particularly when it comes to problem-solving. Now the Co-CEO and Chief Investment Officer of one of the fastest-growing US investment businesses, Gerard received a Ph.D. in aeronautics before entering fund management, attracted to Dimensional because of the opportunity it afforded him to learn from the world-leading economists at the company; including Eugene Fama, Myron Scholes, Merton Miller, Robert Merton, and Ken French. We recently sat down with Gerard to discuss the firm’s research-based culture and rules-based approach to investing. In this episode, we get into the nitty-gritty regarding Dimensional’s distinctive portfolio management decisions and the data sources they draw from and Gerard answers some technical questions regarding risk assessment, factor tilted portfolios, operating profitability, goodwill, and more. We also touch on the value of combining multiple metrics, why small-cap stocks deserve a place in your portfolio, and some of the biggest changes that Gerard has witnessed in Dimensional portfolios over the past decade, as well as how he applies his scientific learnings to make unique portfolio adjustments and some of the various benefits of Dimensional’s integrated approach. Make sure not to miss this informative, insightful, and in-depth conversation with Dimensional CIO and Co-CEO, Gerard O’Reilly!</p> <p> </p> <p><strong>Key Points From This Episode:</strong></p> <ul> <li>Market-cap-weighted passive strategies versus Dimensional’s rules-based higher expected return strategy. <strong>[0:03:45]</strong></li> <li>Assessing risk based on the Intertemporal Capital Asset Pricing Model (ICAPM). <strong>[0:07:07]</strong></li> <li>Diversification in a factor tilted portfolio versus a cap-weighted market portfolio. <strong>[0:10:57]</strong></li> <li>What criteria the variables that Dimensional uses need to meet before they’re considered dimensions of expected returns. <strong