Real Estate
Real Estate Securities Strategy
Dimensional's Real Estate Securities Portfolio is based on original research by Professors Donald Keim and Joseph Gyourko at the Wharton School. The Keim and Gyourko research analyzed the risk/return characteristics of different types of real estate related firms traded on the New York and American stock exchanges. This research indicates that returns from the real estate strategy are related to the actual performance of the real estate market.
The portfolio is market cap weighted and broadly diversified across geography and property type. Investments are made in all eligible, publicly traded real estate investment trusts (REITs). The stocks in the portfolio represent over $100 billion in market capitalization and pro rata ownership of several thousand properties.
On a regular basis, we review all eligible companies to ensure that their principal line of business is real estate-related. We do not purchase health care or prison REITs. Our screening process also excludes REITs that are in extreme financial difficulty, are involved in a merger or consolidation, or are the subject of an acquisition, which could result in a company no longer being principally in the real estate business.
International Real Estate Securities Strategy
Dimensional's International Real Estate Securities Portfolio offers exposure to real estate securities in non-US countries and provides a complement to Dimensional's existing US real estate securities fund as well as the opportunity for additional investment diversification.
The growth of securitized real estate outside the US has created an investment universe with sufficient size and liquidity to make an international real estate strategy feasible. The correlations among international real estate securities have been found to be low across countries, across regions, and within each issuing country's own equity markets, suggesting there are additional diversification benefits that can be obtained from adding the asset class to globally diversified portfolios.
The Portfolio generally uses a market-cap weighted approach and invests in non-US real estate investment trusts (REITs) and companies Dimensional considers to be REIT-like entities. Securities eligible for purchase will generally not be purchased in Dimensional's existing non-US equity strategies. The management of this portfolio is similar to our other portfolios. From a design perspective, we target a broad set of securities in the asset class and strive to be fully invested. From an implementation perspective, we are cognizant of the costs to the investors. These include costs that are difficult to quantify, such as market impact, as well as the factors going into the final expense ratio, such as transaction and management fees. We do not bear the high costs that many active managers incur, such as those caused by high turnover or cash drag, nor are we forced to execute trades around index reconstitutions.
Global Real Estate Securities Strategy
The Global Real Estate Securities Portfolio is a no-load mutual fund designed to achieve long-term capital appreciation. The Portfolio invests in a broad range of securities of US and non-US companies in the real estate industry, including companies in developed and emerging markets, with a focus on real estate investment trusts or companies that Dimensional considers to be REIT-like entities. The Portfolio primarily purchases shares of Dimensional's Real Estate Securities Portfolio and International Real Estate Securities Portfolio. In addition to investing in these underlying funds, the Portfolio also may invest directly in securities of companies in the real estate industry. The Portfolio is currently authorized to invest in companies in the following countries: Australia, Belgium, Canada, China, France, Germany, Greece, Hong Kong, Japan, the Netherlands, New Zealand, Singapore, South Africa, Taiwan, the United Kingdom, and the United States. Other countries may be authorized for investment in the future.
PRINCIPAL RISKS (Real Estate)
The principal risks of investing in these portfolios may include any of the following: fund of funds risk, market risk, foreign securities and currencies risk, small company risk, risk of concentrating in the real estate industry, real estate investment risk, foreign securities and currencies risk, small company risk, and emerging markets risk. These risks are fully described in the prospectus in the section entitled "Principal Risks."
Mutual funds distributed by DFA Securities Inc.