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Santa Monica fund CEO gives $300m to Univ. of Chicago

November 6, 2008 |  6:06 pm

David Booth, chief executive of Santa Monica money manager Dimensional Fund Advisors, has given a $300-million gift to the University of Chicago’s famed business school -- a donation that ranks as the largest ever to the university.

The school now will be named for the 61-year-old Booth, a 1971 MBA graduate who has long kept a low profile in the money management business, despite his success.

Read the Chicago Tribune’s story on Booth’s gift here.

Boothdavid The guiding investment philosophy of Dimensional Fund Advisors, which manages about $120 billion in mutual funds, is based on the efficient market theory -- which maintains that almost no one can be smarter than the market as a whole in the long run. That theory was developed by University of Chicago professor Eugene Fama in the 1960s.

So DFA is a "passive" or "index" investor, buying and holding broad portfolios of shares in a bet that their returns over time will trump the gains of most "active" managers who try to find the stocks with the brightest prospects. The company, which has specialized in passive investing in small stocks, foreign issues and "value" stocks, has developed a cult-following among financial planners and other advisors.

Booth and Rex Sinquefield, another Chicago alumnus, were pioneers of the passive-investing field after studying under Fama. They founded DFA in Brooklyn, N.Y. in 1981, then decided to move the company to Santa Monica in 1985  -- in part, they later said, because they found the area's housing affordable and the commute easy. (Long-time Angelenos, insert your own nostalgic sigh here.)

Unfortunately for Santa Monica, DFA now is in the process of moving its headquarters to Austin, Texas, although a chunk of the operations will remain at the firm’s Ocean Avenue site. Booth already spends most of his time in the Austin office.

Sinquefield retired in 2005.

DFA is a closely held firm. Booth’s gift, tied to a portion of the DFA stock he holds in his family trust, is valued at $300 million based on an initial upfront payment, the income stream from the shares, and a long-term equity interest in the stake.

Photo: David Booth (Annie Wells / Los Angeles Times)

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