Meet with PWL Capital: https://pages.pwlcapital.com/en-ca/contact-us?utm_source=content&utm_medium=youtube&utm_campaign=rationalreminder_yt Avoid Online Scams https://pwlcapital.com/stay-safe-online/ Ben Felix or any PWL employee will never reach out to you on social media platforms or WhatsApp to give financial advice. These are scammers trying to commit fraud. In this episode, we’re joined by Mamdouh Medhat, VP and Senior Researcher at Dimensional Fund Advisors, for an exceptionally deep, exceptionally nerdy exploration of factor investing—focusing on profitability, value, defensive equity, and the persistent misunderstandings that surround them. Mamdouh walks us through his retrospective paper (co-authored with Robert Novy-Marx) on the profitability premium, why profitability subsumes a wide range of quality metrics, and why it dramatically clarifies how we should think about defensive/low-volatility strategies. He also explains the role of profitability in value’s US underperformance since 2007, why price-to-book remains a remarkably effective valuation metric, and how Dimensional incorporates these insights into portfolio construction. In the second half of the conversation, we shift to private markets. Mamdouh unpacks Dimensional’s research on buyouts, venture capital, private credit, and private real estate—revealing what percentage of the global investable universe these funds actually represent, how to benchmark them properly, how much dispersion exists across managers, how fair-value accounting changed the game post-2007, and why many perceived diversification benefits are actually just return smoothing. Timestamps: 0:00:00 Intro 0:05:51 Why it was important to write a retrospective paper on the profitability premium 0:08:26 How well profitability explains the returns of portfolios formed on “quality” 0:12:25 The amount of different flavours of quality Mamdouh looked at 0:19:33 How “defensive”, low volatility, or low beta investment strategies look through the profitability lens 0:22:48 What profitability says about long-only low beta stocks 0:26:11 How alternative value metrics hold up when profitability is considered 0:31:12 How much of value’s recent underperformance is explained by profitability 0:36:24 What makes the combination of traditional value and profitability a sensible combination for explaining differences in returns 0:40:02 The main academic implications of the findings documented in Mamdouh's paper 0:43:56 The metric Dimensional uses to implement profitability in portfolios, and why 0:48:59 The downsides of tilting toward or away from countries based on their aggregate characteristics 0:55:03 How Dimensional deals with country and industry weights 0:57:42 How much of the global investable universe in stocks, bonds, and real estate consists of private funds 1:02:11 How private funds perform relative to style-appropriate benchmarks 1:07:13 What private assets look like through the lens of public market factor exposures 1:12:43 How much dispersion there is in private fund performance 1:16:24 Given the wide dispersion, whethere there is any criteria to predict successful managers 1:22:15 How private fund performance relative to public benchmarks has trended over time 1:27:00 The effect increasing popularity of private investments might have on their expected returns 1:33:40 Mamdouh defines success in his life Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/ Cameron Passmore — https://pwlcapital.com/our-team/ Cameron on X — https://x.com/CameronPassmore Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/