The RIA Behind Dimensional Fund Advisors’ Fastest-Ever $1 Billion

Forum Financial Management couldn’t find the bond fund it wanted so it called DFA. Here’s how the Global Core Plus Fixed Income Portfolio came to be.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

One of the first things Nirav Batavia did when he joined Forum Financial Management in 2015 was inspect the $3.8 billion RIA’s fixed income strategy. Having previously managed a $1 billion debt portfolio at Citigroup, and co-founded a fixed-income hedge fund, Batavia thought he could help.

Forum’s analysis, along with outside research, suggested there was an opportunity to improve returns from exposure to the broad global fixed-income market. Introducing more high-yield, below investment grade bonds to a typical core bond allocation could deliver that, while maintaining a similar risk profile, Batavia said.

The long list of high-yield bond funds available didn’t suit Forum’s need, largely due to liquidity risk, according to Batavia. The Lombard, Ill.-based RIA then began searching for a core bond fund with the desired attributes for client portfolios taking on moderate risk. Only they couldn’t find one. It didn’t exist, they said.

So, Jonathan Rogers, Forum’s co-managing partner and co-director of its investment committee, called and pitched the idea for a new fund to his former employer, Dimensional Fund Advisors.

As is often the case, timing is everything.

“They were actually looking at the high-yield bond space at that time, unbeknownst to us,” Rogers said.

Months later, after wrapping up its own research, DFA reached back out to Forum in 2016 and the two parties began working on the mutual fund that would become the Global Core Plus Fixed Income Portfolio (ticker: DGCFX).

Over nine in-person meetings, and a dozen or more calls, the details of the fund were ironed out, Rogers said. There was some debate about how deep into the credit risk spectrum the fund should go.

When DFA suggested the fund should include up to 10% BB-rated bonds, Batavia and Rogers sensed further opportunity. The RIA believed that exposure could be bumped up, to give the fund better risk premium and a wider bond universe to select from, and still maintain the desired risk profile. Everyone eventually agreed on a maximum of 20%.

To be sure, the change was not one made to appease Forum. DFA doesn’t create funds on a whim. “If it was just for us, even though we are a pretty heavy [DFA] user, it wouldn’t have happened,” Batavia said.

Forum alone seeded the launch of the new mutual fund in November of 2018 but now the RIA accounts for less than 50% of the fund’s holdings, according to DFA. The Global Core Plus Fixed Income Portfolio reported net assets of $1.3 billion at the end of August 2019. It was the fastest-ever DFA fixed-income fund to accumulate $1 billion.

Bryce Skaff, co-head of the Global Client Group at DFA, said the company isn’t totally surprised that advisors have taken to the fund. The asset manager likes to think of itself as a solution provider, not a product manufacturer. A fund’s success is not solely dependent on net asset flows or its performance, said Skaff.

“Generally, all of our mutual funds are launched in response to broad investor needs out there and based on advisors and institutions serving clients,” Savina Rizova, the head of research at DFA.

Only nine months after the fund launched, DFA began debuting similar funds in international markets. The fund has been met with the same enthusiasm abroad, according to Rizova.

”This fund could start doing in the fixed income space what Dimensional has done over the last 30 years in the equity space,” Batavia said.

Forum doesn’t stand to gain anything financially for collaborating with DFA on the fund. Although, they hope the net assets continue to grow and potentially drive down the cost.

Still, the RIA says their clients are better off and they will probably look back and consider it a career milestone. New investment ideas feel fewer in number these days and not many RIAs can say they worked with DFA to make one reality.

Correction: A previous version of this story incorrectly stated Forum accounted for less than 30% of the The Global Core Plus Fixed Income Portfolio. It accounts for less than 50%.

Related Articles