November 14, 2011
We recently attended the Dimensional Fund Advisors (DFA) Canadian Investment Conference. This conference was unlike those typically organized by mutual-fund companies, as a lot of the presentations were made by finance professors such as Eugene Fama (University of Chicago) and Ken French (University of Dartmouth), plus some younger talented academics. Ideas from these thinkers have been part of the curriculum at business schools for decades. Here are two important takeaways from these presentations:
These research results advocate strongly in favor of international diversification. While the Canadian market has been among the best-performing stock markets worldwide in the last decade, there is no certainty that it will rank among the high performers going forward. While a certain degree of home bias may be appropriate (chiefly to reduce taxes), international diversification definitely helps to alleviate the risk of holding the “wrong” country market over long periods. This explains why PWL portfolios generally are far more internationally diversified than the average Canadian pension fund.
Chairman of the Investment Committee
and Director of Research
PWL Capital Inc.