The cofounder of Dimensional Fund Advisors discusses giving back to Booth, creating the first index fund, and his passion for chess.
- May 09, 2019
Raised in a Catholic orphanage in St. Louis, Rex Sinquefield, ’72, rose from his humble beginnings to pioneer the first index funds in the 1970s, and then cofounded Dimensional Fund Advisors with David Booth, ’71, in 1981.
In his retirement years he’s developed a vast and varied portfolio of political and philanthropic causes, especially in his home state of Missouri, and is credited with driving a chess renaissance in the United States.
How did classes you took from Nobel laureates Merton Miller and Eugene F. Fama, MBA ’64, PhD ’64, influence you?
In the first five minutes of the first class with Merton Miller, Business 301—it was macroeconomics—he talked about the [inherent] efficiency of markets. I listened to that and it was like an epiphany. I said, “It’s got to be true.” All the crazy, fluctuating prices: this is the ordering principle. And then I took three courses from Fama because he was teaching about finance and portfolio theory. I took everything from him that I could.
How did that inspire you to create the first index fund?
It was almost directly causal. I decided that I wanted to work in investments. I interviewed with the five largest banks in Chicago and two or three of the largest banks in both New York and Los Angeles. I got rejected by all of them. But one bank, American National Bank of Chicago, hired me into the trust department. I quickly talked my way into portfolio management and then proposed to the bank that they start an S&P index fund. Over the summer of 1973, I had to show them that we could, in fact, form a portfolio that exactly replicated the performance of the S&P without buying all 500 stocks. So, in September 1973, we converted two existing funds into S&P index funds. And they were, it’s fairly safe to say, the first two on the planet. Actually, the first two in the galaxy.
Why was it important to you to support endowed chairs for Miller; James Lorie, PhD ’47; Myron Scholes, MBA ’64, PhD ’70; and Fama?
They were certainly deserving individuals. They’d done a lot for the field of finance, and I, of course, benefited from them enormously. My whole career was influenced by what they did. None of what I did would have happened without that education—without being at Chicago at exactly the right time. There’s a lot to be said for dumb luck.
You met your wife, Jeanne Sinquefield, PhD ’72 (Demography), MBA ’79, when you were both students at the University of Chicago. How?
We met in judo club. She was finishing up her PhD in sociology. She was a third-degree brown belt. I had been doing judo since I was in the Army. For two years we were commuting to Jakarta from Chicago while she conducted research in Indonesia. After that, she didn’t want to go back into demography, so she decided to get an MBA.
You’ve created a world-class chess club and educational center in St. Louis, even getting the attention of HBO’s Real Sports with Bryant Gumbel, which featured you in a segment last year. When did you start playing and what attracts you to the game?
I learned at 13. My Uncle Fred taught me. I beat him the second game we played. I always felt a little badly about that. It’s just beautiful. There’s sort of a mathematical precision and beauty to it. We have a big program bringing chess into 140 schools here through the St. Louis Chess Club. We have three economists continually evaluating what we’re doing, and they see enormous cognitive benefits and changes in the attitudes of kids toward school. It’s just a real boost for these kids.
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