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 -- the largest ever donation 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.
The investment philosophy of Dimensional Fund Advisors, manager of 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. The theory was developed by University of Chicago professor Eugene Fama in the 1960s.
Closely held DFA is a "passive" or "index" investor, buying and holding broad portfolios of shares in a bet that returns over time will trump the gains of most "active" managers who try to find stocks with the brightest prospects.
The company specializes in passive investing in small stocks, foreign issues and so-called value stocks, and markets its funds exclusively via financial advisors.
Booth and Rex Sinquefield, another Chicago alumnus, were pioneers of the passive-investing field. After founding DFA in Brooklyn in 1981, they moved the company to Santa Monica in 1985 -- in part, they later said, because they found the area's housing affordable and the commute easy.
Unfortunately for Santa Monica, DFA now is in the process of moving its headquarters to Austin, Texas, though 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.
Booth's gift initially will consist largely of the income stream from $300 million of DFA stock held in his family trust.