This week, we speak with Gerard O’Reilly, who is chief investment officer and co-chief executive officer at Dimensional Fund Advisors, which has $650 billion in assets under management. O’Reilly is also a director at the firm. Prior to joining Dimensional in 2004, O’Reilly earned a Ph.D. in aeronautics from the California Institute of Technology.
We discuss “Gene, Ken & Bob” — Eugene Fama, Ken French, Robert Merton — who are the brilliant academics that drive much of the research at DFA. O’Reilly’s ability to work closely with them, putting their abstract theories to work to generate improved portfolio performance is behind his rapid rise within Dimensional Funds. He began his work in DFA’s research department, where it turns out, that having a Ph.D. in aeronautics is applicable to the study of finance. Eventually, he rose to become CIO, and not long after that, he became c0-CEO.
O’Reilly explains why the Fama-French factor models have been so successful, and why market cap size, quality, and value have persisted over very long periods of time. His ability to delve deeply into academic research, as well as the underlying data, has been an enormous advantage to him. We also discuss why backtesting always looks so great — no shares bad backtests, so survivorship bias is partially at work.
His personal motto is “Do the right thing, do it the right way, do it right now.”
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Adam Parker, founder of Trivariate Research. He began his career as a semiconductor analyst at Sanford C. Bernstein, where he became the #1 ranked semi analyst by Institutional Investor, and eventually rose to Head of Research. At Morgan Stanley, he was the Chief US Equity Strategist and Director of Global Quant Research, where he was named to the Institutional Investor’s All-America Team. He was a member of MS’s global investment committee, overseeing $2 trillion in private wealth.
Gerard O’Reilly’s Favorite Books
Free to Choose: A Personal Statement by Milton Friedman and Rose Friedman
The Road to Serfdom by Fredrich A. Hayek