FTSE and Rob Arnott Launch First Fundamental Indexes

FTSE Group (FTSE), the global index provider, and Rob Arnott, Chairman of Research Affiliates and creator of the Research Affiliates Fundamental Index (RAFI) have signed an agreement to work together to introduce fundamental indexes for the USA and international financial markets. Fundamental indexing offers investors the same features as traditional passive capitalized weighted indexing such as: low turnover costs, broad diversification, vast capacity and transparent rules based selection. Most interesting is that RAFI studies indicate that the fundamental indexes have produced consistently higher returns, at modestly lower risk, when compared to cap weighted indexes. Fundamental indexing selects, ranks and weights companies, not by market capitalization, but by financial fundamental measures, such as sales, cash flow, book price and dividends. “CalPERS is intrigued by the concept of fundamental index construction and how this new approach may complement our traditional passive investments in market capitalization weighted benchmarks. We will be examining this innovative idea closely”, a spokesperson from CalPERS Investment Office in Sacramento commented. Matt Clark at South Dakota Investment Council stated “Late last year, we made the inaugural investment in the fundamental indexes approach; we felt that it was and is an important advance in equity management. While we focus on […]

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