Rob Arnott is the founder of Research Affiliates, a global leader in innovative investing and asset allocation strategies. The firm is perhaps best known for its role in developing fundamentally-weighted indexes that utilize the RAFI methodology. This strategy involves selecting and weighting securities by fundamental measures of company size, as opposed to market capitalization. The methodology captures many of the benefits of passive investing—such as transparency, objectivity, broad economic representation, and diversification—with less exposure to pricing errors and fads. Several ETFs are linked to RAFI indexes, including several PowerShares products and a long/short ETF from ProShares.
Rob recently sat down with ETF Database to talk about some of the limitations of traditional cap weighting methodologies, why alternatives have been slow to catch on, and what fundamental indexing can bring to the bond space: [click to continue…]
The PowerShares FTSE RAFI U.S. 1000 Portfolio (PRF) recently passed its five year milestone, a period during which the fundamentally-weighted product outperformed many more popular market-cap weighted ETFs. PRF debuted in December 2005, and for the five year period ended December 31, 2010 it achieved a cumulative total return of 23.1% (based on NAV). That [...]
When constructing a portfolio, most investors focus on the decisions that seem to have the most significant impact on the risk/return profile delivered. How much should be allocated to stocks vs. bonds? What breakdown between developed and emerging markets is desired? What sectors should be overweight, and which should be avoided? These decisions obviously go [...]
ProShares, the Maryland-based ETF issuer known as a pioneer of leveraged exchange-traded products, announced today the latest addition to its product line. Like many of the new products hitting the market in recent weeks, the ProShares RAFI Long/Short (RALS) will be the first of its kind. RALS will seek to replicate the RAFI U.S. Equity [...]
As ETFs have burst on to the scene in recent years and worked their way into the investing mainstream, the number of products available and complexity of exposure offered has increased significantly. Advisors and investors have taken steps to educate themselves on the ins and outs of ETFs, but many are still scrambling to play [...]
The meteoric rise of the ETF industry–and to a smaller extent the introduction of index mutual funds some 20 years earlier–has had the effect of transforming indexes from hypothetical measures of performance into investable assets. As indexing strategies continue to gain more widespread acceptance with all levels of investors, the scrutiny of construction and maintenance [...]
ETFs started March on a high note, as major indexes gained over 1% for the week. This increase came after a job market report saw the unemployment rate hold steady, slightly exceeding expectations. Industrials and technology stocks were some of the best performers as 1,000 jobs were added to the American manufacturing industry and Apple [...]
In recent years, investors have begun moving away from traditional active management in favor of more cost-efficient indexing strategies. The result has been a tremendous surge in the popularity of ETFs and a serious threat to actively-managed mutual funds that have dominated the investment industry for decades. As market indexes have transitioned from performance benchmarks [...]
