The concept of Dimensional
It’s a fact that the majority of Asset-Managers is not able to beat the benchmark. Most investors therefore earn a lot less than the capital markets’ returns.
One of the main reasons for this are management fees and transaction costs. By investing in passive investment products like ETFs, clients can reduce fees by 2 to 3% annually compared with active Asset –Management-Concepts. Fees are reduced at the level of the investment funds as well as on the level of the client portfolio itself: in the client’s portfolios only few transactions occur since a rebalancing is only done once or twice a year or after “special events”. The portfolio rebalancing leads to an anticyclical investment strategy: securities are sold if prices increased and bought after a decline of prices.
Client’s accounts can be carried at financial institutions in the US and Europe.
Why do most actively managed portfolios fail to outperform their benchmarks?
Usually, this failure is based on wrong or unfortunate “stock picking” or timing decisions.
The crucial elements are:
The use of passively managed instruments;
Making no attempt to time the market;
A low turnover;
Very low administrative and transaction costs on all levels;
A customized asset allocation based on the Ceros-Dimensional concept.
Global asset allocation based on the Ceros-Dimensional concept
The concept is based on a passive asset management approach, that, in the long run, will save the customer around 2%-3% of costs every year, thus producing a net profit superior to traditional types of asset management. The number of transactions is rather low, both at the level of the mutual funds used and at the level of the individual clients’ portfolios.
The crucial first step: to get the asset allocation right.
Experience shows that the influence an active asset allocation and the selection of sectors and regions have on the portfolio’s performance by far outweigh the importance of individual trading activities aimed at timing markets.
Therefore, a customized asset allocation comprised of stocks, bonds, cash, regions, industry sectors, etc. is determined based on the individual customer’s risk profile. Once implemented it will be adhered to for a longer period of time.
After the respective portfolio is determined using this process, the allocated funds are invested in passively managed instruments using both ETFs (Exchange Traded Funds) replicating well-known indices as well as mutual funds managed by Dimensional Fund Advisors. DFA-funds have produced excellent results over many years and provide certain advantages over “classical” passive products.
Usually, a customer portfolio will only be rebalanced once or twice a year. This keeps transaction costs low. Periodically rebalancing the portfolio results in positions being traded in an anti-cyclical manner at comparatively attractive price levels.
A passive approach avoids the risk of under performing selected markets and market sectors. The detrimental effect of individual bad or unfortunate trading decisions is eliminated.
Cerosnewdimension is based on analysis and research provided by Dimensional Fund Advisors, a US-based asset manager with approximately $ 300 billion under management. Accounts can be held at – among other renowned financial institutions – V-bank, DAB and National Financial Services.
– Very low costs
– Customized asset allocation
– A low number of transactions
– No timing errors
– Anti-cyclical investing
– Ease of use
– Unlimited scalability
The information contained in this presentation does not constitute investment advice or a recommendation. It only serves to describe the product. Investment opportunities are matched by corresponding risks. Past investment performance is no guarantee for future performance. Investment decisions should be made in each case only on the basis of further materials and research. Ceros only offers general consulting services, no financial services regulated by German KWG
For clients interested in Private Equity / Venture Capital investments, we are able to structure portfolios in cooperation with specialized partners.