Dimensional updates ISERS on emerging‑markets value strategy amid recent volatility

Ted Simpson, regional director and vice president at Dimensional Fund Advisors, told the Imperial County Employees' Retirement System board on May 21 that Dimensional’s emerging‑markets all‑cap value strategy blends deep value, small‑cap exposure and a profitability (quality) overlay and that the firm has managed ISERS’ account “for just over a dozen years.”

The presentation said the strategy aims to sit between passive indexing and traditional active management: “very broadly diversified, thousands of securities, low fees, similar to index funds but also absolutely structuring the portfolio to provide outperformance,” Simpson said. He described three primary drivers the team targets—size (small cap), relative price (value) and profitability (quality)—and explained how the strategy excludes securities with the lowest profitability within small caps.

Why it matters: ISERS’ emerging‑markets allocation is intended to capture long‑term premia that, by Dimensional’s account, have historically favored small, cheaper and more profitable firms. Board members pressed presenters on recent market effects, including tariffs and short‑term reversals, and Simpson stressed the firm’s process‑driven approach and that it does not make rapid, market‑timing changes based on headlines.

Performance and positioning: Simpson said the strategy has lagged benchmarks in the most recent three‑ and twelve‑month periods because Dimensional’s deeper small‑cap and deeper‑value exposure underperformed those periods’ shallower value and larger‑cap moves. He reported that, as of late in the quarter, the portfolio had rebounded: “for the quarter, our portfolio is up 5.5%” and “year to date, we’re up just under 9%,” he said. Simpson also noted the portfolio’s lower price‑to‑book relative to benchmarks and its inclusion of micro caps down to roughly $50 million market caps.

Questions from trustees focused on geopolitical risks and tariffs. Simpson said Dimensional does not change its modeling in reaction to tariffs alone but monitors local markets and will pause trading or slow purchases in markets experiencing extreme stress: “we will absolutely kind of keep that in mind … if tanks come out in the streets … we are not in a panic sell,” he said.

Board context and next steps: Simpson concluded by thanking trustees for the long‑term relationship. The presentation served as an update; no formal board action was taken on the Dimensional mandate during the meeting.

Ending: Trustees proceeded to subsequent manager presentations and portfolio reviews after the update.