Press ReleasesNewport Beach, CA, April 15, 2013 -- Research Affiliates, LLC today announced that the Japanese Patent Office has approved the issuance of Japan Patent No. 5219835 for the company's innovative Fundamental Index® methodology which selects and weights securities using fundamental measures of company size rather than by market capitalization.
"We are deeply gratified that the Japanese Patent and Trademark Office has awarded us this patent," said Robert Arnott, chairman and CEO of Research Affiliates. "Our core business involves developing and licensing new product ideas to asset managers. We can protect these ideas with patents, and make our ideas available to a wider audience.”
About Research Affiliates, LLC
Research Affiliates, a global leader in innovative investing and asset allocation strategies, operates worldwide from its base in Newport Beach, Calif. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of licensing agreements, sub-advisory services, and direct asset management. Approximately $124 billion in assets are managed worldwide using investment strategies developed by Research Affiliates, as of December 31, 2012.
7 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - April 15, 2013
Helge Kostka has joined Research Affiliates Global Advisors (Europe) Limited as Vice President, responsible for business development and partner and client support in the United Kingdom.
"Helge has tremendous experience in both developing and marketing smart beta and other quantitative investment products," said Michael Larsen, Head of Affiliate Relations at Research Affiliates, LLC, the U.S.-based investment advisor. "He will spearhead business development and partner and client support efforts for Fundamental Index equity and fixed-income strategies in the United Kingdom, working with asset owners, consultants and our business partners."
Smart beta investment strategies, such as the Fundamental Index® methodology, offer the opportunity of obtaining outperformance over a benchmark while retaining the benefits of traditional capitalization-weighted indexes, such as broad market exposure, diversification, liquidity, transparency, and low-cost access to markets. U.K. institutional investors have displayed a growing appetite for such strategies as a complement to traditional cap-weighted index strategies as well as active management. Doug Gratz will continue marketing efforts in continental Europe for Research Affiliates, LLC.
Prior to joining Research Affiliates Global Advisors (Europe), Mr. Kostka served as Head of Product Management for equity and multi-asset solutions for Aviva Investors. Previously, he served in a number of roles for Deutsche Bank's asset management entities, including as head of quantitative alpha selection and head of portfolio engineering.
Mr. Kostka graduated with an Executive MSc in risk management and investment management from EDHEC-Risk Institute. He also has the German equivalent of an MBA from Fachhochschule fuer Oekonomie und Management (Essen, Germany), and a Bachelor's degree in financing and accounting from Hogeschool (Utrecht, The Netherlands).
Mr. Kostka can be reached at +44 7909 53 9986; his e-mail address is kostka@rallc.com. 1 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - October 22, 2012
Citi and Research Affiliates are launching a new global sovereign bond index series based on measures of size. The Citi RAFI® Bond Index Series decreases exposure to aging and debt-laden economies such as Japan and the United States and increases exposure to younger, resource-rich countries such as Australia and Canada. The series extends the pioneering Research Affiliates Fundamental Index® (RAFI®) methodology to sovereign debt.
Traditional bond indices weight securities based on market capitalization, which results in investors making their biggest bets on the biggest debtors. The new series weights each country by its economic footprint. Specifically, each country’s weight is calculated via an equally weighted average of four factors - GDP, energy consumption, population and rescaled land area. As a result, this methodology results in country weights that reflect each nation’s ability to service its debt, which has become a growing concern as the sovereign debt crisis evolves.
The Citi RAFI series provides significantly different weights to countries, as can be seen in the table below listing the top five country weights for the respective indices:
Citi RAFI Sovereign
Developed Markets
Bond Index Master |
Equivalent Sovereign
Developed Markets
Capitalization Index |
| US |
21.77% |
Japan |
32.93% |
| Japan |
8.90% |
US |
27.66% |
| Canada |
7.77% |
France |
6.39% |
| Germany |
6.68% |
Germany |
6.37% |
| Australia |
6.56% |
UK |
5.82% |
The Citi RAFI Bond Index Series combines Citi’s expertise and experience in developing fixed-income indices and RA’s strength as a creator of innovative index strategies. RA is the global market leader of fundamentally weighted indices, with more than $50 billion in assets linked to the firm’s Fundamental Index® methodology.
“Mounting debt and deficits combined with aging demographics pose a 3-D hurricane to developed nations,” explained Rob Arnott, chairman and CEO of Research Affiliates. “Existing capitalization-weighted bond indices tend to overweight the largest debtors, without regard to whether they deliver a yield commensurate with the risk they are taking. It seems to us that weighting a bond index in proportion to underlying economic scale makes more sense than weighting in proportion to the outstanding debt. This new investable bond series will help investors find a more optimal way of investing in broadly diversified and transparent bond portfolios. We are pleased to work with Citi on developing this new series.”
The Citi RAFI Sovereign Developed Markets Bond Index would have outperformed a capitalization-weighted index over long time periods, while maintaining comparable duration risk. Over the 10-year period ending December 31, 2011, the Citi RAFI Index would have returned 8.6% on an annualized basis, compared with an equivalent market-capitalization-weighted index return of 7.8%, based on simulated results.
“Alternative weighting methodologies are a growing part of the toolkit for fixed income investment, particularly in this challenging economic environment,” said Richard Burns, Global Head of The Yield Book & Citi Fixed Income Indices. “The Citi RAFI Bond Index Series provides access to an alternative weighting methodology, whilst also preserving all the advantages of passive investing including diversification, transparency, liquidity and limited transaction costs. Citi is pleased to be working with Research Affiliates on this index series, combining our long-standing experience in fixed income indexing with Research Affiliates’ proven expertise in fundamental weighting.”
The new series, which is available on Bloomberg, comprises both sovereign developed and emerging markets bond indices. A developed corporate bond index will be released in Spring. The sovereign bond indices are available for licensing as investment solutions to institutional investors and asset managers.
About Citi
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
About Research Affiliates, LLC:
Research Affiliates, a global leader in innovative investing and asset allocation strategies, operates worldwide from its base in Newport Beach, Calif. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of licensing agreements, sub-advisory services, and direct asset management. Approximately $87 billion in assets are managed worldwide using investment strategies developed by Research Affiliates, as of December 31, 2011.
Citi, the arc design, and The Yield Book® are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world. The trade names RAFI®, the RAFI logo, and the Research Affiliates corporate name and logo are registered trademarks and are the exclusive property of Research Affiliates, LLC. Fundamental Index® concept, the non-capitalization method for creating and weighting of an index of securities, is the patented and patent-pending proprietary intellectual property of Research Affiliates, LLC.
Media contacts:
Simon Boughey, Citi +44 (207) 508-3864, simon.boughey@citi.com
Jeffrey French, Citi +44 (207) 500-8304, jeffrey.french@citi.com
Tucker Hewes, Hewes Communications, Inc., +1 (212) 207-9451, tucker@hewescomm.com
Joel Chernoff, Research Affiliates, LLC, +1 (949) 325-8729, chernoff@rallc.com
Issued: January 23, 2012
2 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - January 23, 2012
New Index is Designed to Provide an Absolute Return
Newport Beach, Calif. - Research Affiliates, LLC is launching a U.S. equity long/short index based on its pioneering Fundamental Index® methodology.
The RAFI® US Equity Long/Short Index takes long positions in companies with large RAFI weights relative to their capitalization weights and short positions in companies with the small RAFI weights relative to their capitalization weights. By doing so, the index is designed to generate an absolute return over a full market cycle. The index has produced returns uncorrelated to equities, fixed income and even other absolute-return strategies, based on simulated data.
Over the 10-year period ended Oct. 31, 2010, the RAFI US Equity Long/Short Index returned an annualized 7.70% based on a simulation, compared with -0.02% for the Standard & Poor's 500 Index and 6.39% for the Barclays Capital U.S. Aggregate Bond Index. One month Treasury bills-a typical benchmark for absolute-return strategies-returned 2.19%.
The Fundamental Index approach uses measures of company size instead of security price in selecting and weighting securities. Historically, RAFI indexes have generated significant outperformance over time by using measures of a company's economic footprint and through its rebalancing process that shifts assets into the least-favored securities and out of the most-favored-and thus most expensive-securities.
"This absolute-return index provides another important tool for investors," said Rob Arnott, Research Affiliate's chairman and CEO. "We believe products based on this index will be invaluable, as investors seek investments that can profit from turbulence, or investments that can prosper when markets are expensive and vulnerable," he added.
The index will be rebalanced monthly so that the total value of longs equals the total value of shorts. The index will be reconstituted annually; at that time, new long and short positions will be selected and weighted. The reconstitution also will result in neutral sector weightings.
Research Affiliates will license the index to fund sponsors, institutional investors and large asset owners.
About Research Affiliates, LLC
Research Affiliates, a global leader in innovative investing and asset allocation strategies, operates worldwide from its base in Newport Beach, Calif. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of direct asset management, sub-advisory services, and licensing agreements.
The firm is majority employee-owned and has 60 employees. Approximately $61 billion in assets were managed worldwide using investment strategies developed by Research Affiliates, as of Sept. 30, 2010.
Media contacts:
Tucker Hewes, Hewes Communications, Inc., (212) 207-9451, tucker@hewescomm.com
Joel Chernoff, Research Affiliates, LLC, (949) 325-8729, chernoff@rallc.com
The RAFI® US Equity Long/Short Index Series is calculated by Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC. "Dow Jones Indexes" is a service mark of Dow Jones Trademark Holdings LLC ("Dow Jones").
The trade names Fundamental Index®, RAFI®, the RAFI logo, and the Research Affiliates corporate name and logo are registered trademarks and are the exclusive property of Research Affiliates, LLC. Fundamental Index® concept, the non-capitalization method for creating and weighting of an index of securities, is the patented and patent-pending proprietary intellectual property of Research Affiliates, LLC.
Issued: December 6, 2010
3 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - December 06, 2010
New Relationship Will Produce Innovative Strategy Index Series
Tacoma, Wash., and Newport Beach, Calif. - Russell Investments and Research Affiliates have agreed to launch a new index series based on the ground-breaking Fundamental Index® methodology.
The new relationship aims to produce readily investable "strategy indexes," a category of indexes intended for investors who seek a more active investment approach. Through these new indexes, investors will have the opportunity to obtain much sought-after alternative beta exposures that are appropriate for their portfolios.
"We're very pleased to collaborate with Research Affiliates on this innovative index design," said Ron Bundy, managing director for Russell Indexes. "Working with the leader in fundamentally weighted index methodology, we'll construct strategy indexes of the highest quality to serve the increasing demand for beta investment solutions."
Bundy added that today's announcement, which continues Russell's long track record of innovative index launches, doesn't change the firm's belief that Russell's market capitalization-weighted indexes remain the best description of the investable opportunity set and thus the most appropriate benchmarks.
"Fundamental Index strategies are rapidly gaining acceptance around the world. We are thrilled to see Russell, a pioneer in index construction, embrace the concept, and to work with them on the development of these new fundamentally weighted strategy indexes," said Rob Arnott, chairman of Research Affiliates.
The Fundamental Index methodology selects and weights securities by fundamental measures of company size, as opposed to using the price-weighted methodology employed by traditional indexes. Currently, approximately $50 billion in assets are invested in products that use non-price-weighted index strategies as the underlying index.
The initial offering likely will be a global index that includes U.S. and non-U.S. exposures. Details on the new series will be issued closer to their launch late in the third quarter.
These new investment tools will be available for licensing to exchange-traded fund sponsors, institutional investors and large plan sponsors.
About Russell Investments
Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisers and individuals in more than 40 countries. Over the course of its history, Russell's innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership. The firm has $179 billion in assets under management, as of March 31, 2010. To see how Russell helps to improve financial security for people, visit www.russell.com.
Russell launched its family of indexes in 1984 to more accurately measure U.S. market segments and better track investment manager behavior for its investment management and consulting businesses. The innovative index design includes float-adjusted market capitalization, annual reconstitution, multifactor style analysis as well as objective and transparent rules. Russell Indexes account for more than $3.9 trillion in benchmarked assets, as of December 31, 2009.
About Research Affiliates, LLC
Research Affiliates, a global leader in innovative investing and asset allocation strategies, operates worldwide from its base in Newport Beach, Calif. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of direct asset management, sub-advisory services, and licensing agreements. The firm is majority employee-owned and employs a team of 50 dedicated professionals. Approximately $50 billion in assets are managed worldwide using investment strategies developed by Research Affiliates, as of March 31, 2010.
Media contacts:
Steve Claiborne, Russell Investments, 253-439-1858, newsroom@russell.com
Tucker Hewes, Hewes Communications, Inc., 212-207-9451, hewesteam@hewescomm.com
Issued: June 25, 2010
4 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - June 25, 2010
New Indexes Extend Fundamental Index® Methodology into Fixed Income
Newport Beach, CA, and New York, NY, February 10, 2010 - Research Affiliates, LLC, and Ryan ALM, Inc., today announced the launch, effective January 1, 2010, of the RAFI US Corporate Bond Index Series for Investment Grade and High Yield. This series of investable, broad market indexes is the first to apply the Research Affiliates Fundamental Index® methodology for the creation and calculation of bond indexes.
"In seeking to test and extend the boundaries of the Fundamental Index methodology, we applied the approach to bonds looking at US Corporate Investment Grade and High Yield," said Research Affiliates founder Rob Arnott. "The results were compelling, further validating the methodology and offering investors a more efficient means of constructing a bond index or portfolio with superior risk/reward characteristics."
The Fundamental Index methodology has received numerous awards for innovation and index provider of the year. Currently there are more than 100 equity indexes available through the FTSE RAFI Index Series and more than 200 investment products and separate mandates currently being managed to the methodologies by investors, managers and fund sponsors globally.
In calculating the RAFI® US Corporate Bond Index Series, Research Affiliates provides its Fundamental Index methodology for the creation of an index using fundamental measures of company size. Ryan ALM Index Division applies the methodology to construct and calculate the indexes.
The RAFI US Corporate Bond Indexes start with a universe of 5,000 issues that are then given fundamental weights. Ryan ALM then selects issues that qualify under the index rules, shown below in Tables 1 and 2. A most unique feature of the index rules is the creation of three maturity cells (1-5 years, 5-10 years, and 10+ years) whereby each index only selects the single bond with the highest amount outstanding per issuer per maturity cell. For example, the 1-30+ year index series would have three maturity cells allowing for three issues of the same issuer if they qualify under the index rules. This ensures the greatest liquidity for each index such that investors can actually buy and duplicate the index portfolios, while maintaining exposure to the underlying duration and credit characteristics. Each index has been back-tested to December 31, 1999, and has demonstrated consistent performance versus comparable traditional bond indexes.
RAFI US Corporate Bond Index Series includes:
- RAFI US Investment Grade Corporate Master Index
- RAFI US Investment Grade Corporate Bond Index, 1-5 year
- RAFI US Investment Grade Corporate Bond Index, 1-10 year
- RAFI US Investment Grade Corporate Bond Index, 10 year +
- RAFI US Investment Grade Corporate Bond Index, 1-30 year
- RAFI US High Yield Bond Master Index
- RAFI US high Yield Bond Index, 1-5 year
- RAFI US High Yield Bond Index, 1-10 year
- RAFI US High Yield Bond Index, 1-30 year
Ron Ryan, CEO of Ryan ALM explains: "The RAFI US Corporate Bond Index Series is the result of a partnership leveraging the proven expertise of Research Affiliates in fundamental weights for indexes and Ryan ALM's expertise in designing bond indexes that are more investable, liquid, and transparent than traditional bond indexes providing a "best fit" solution for fund sponsors. Traditional U.S. corporate bond indexes have thousands of bonds, most of which don't trade, have low amounts outstanding, are hard to price, and lead to tracking errors that may result in poor risk/reward behaviors."
Table 1. RAFI US Investment Grade Corporate Bond Index Series
Minimum Face Value
Rating Parameters
Maturity Parameters
Call Protection
Weightings
Rebalancing |
$500 million (generally largest issue picked per issuer per maturity cell)
At least BBB by both Moody's and S&P
Five Index Series (Master, 1-5, 1-10, 10+, 1-30+ years)
Minimum of 3 years generally
RAFI Fundamental Weights
RAFI Fundamental Weights (annual rebalance)
Index Rules (month-end rebalance) |
Table 2. RAFI US High Yield Bond Index Series
Minimum Face Value
Rating Parameters
Maturity Parameters
Call Protection
Weightings
Rebalancing |
$350 million (generally largest issue picked per issuer per maturity cell)
BB to B by both Moody's and S&P, and split rated BBB/BB
Four Index Series (Master, 1-5, 1-10, 1-30+ years)
Minimum of 3 years generally
RAFI Fundamental Weights
RAFI Fundamental Weights (annual rebalance)
Index Rules (month-end rebalance) |
About Research Affiliates, LLC.
Research Affiliates, a global leader in innovative investing and asset allocation strategies, has operated worldwide from its base in California since 2002. Dedicated to solving complex investment issues, the firm creates innovative strategies that respond to the current needs of the market. Leveraging its strong research focus, Research Affiliates distributes products in partnership with some of the world's leading financial institutions. These affiliations take the form of direct asset management, sub-advisory services, and licensing agreements.
The firm is majority employee-owned and employs a team of 50 dedicated professionals. Research Affiliates offers advisory services, sub-advisory services, and custom solutions to meet a client's investment needs.
Approximately $46 billion in assets are managed worldwide using investment strategies developed by Research Affiliates, as of December 31, 2009.
About Ryan ALM, Inc.
Ryan ALM, Inc. is both a bond index provider and bond asset management firm. Its Index Division (ALM Research Solutions, LLC) designs, maintains and delivers over 70 generic indexes designed by the firm. This includes the Ryan Treasury Yield Curve series (13 Auction maturities, 31 STRIPS and four PowerShares maturity ladder series), FAS 158 Yield Curves, ESG, Green and Corporate bond indexes. Moreover, Ryan ALM is a leader in designing Custom Liability Indexes for its clients. The Index Division primary architect is Ron Ryan, CFA who won the William F. Sharpe Lifetime Index Achievement Award. The Ryan ALM asset management division (Ryan ALM Advisers, LLC) manages bonds as index funds versus all the indexes they create (especially Custom Liability Indexes as Liability Index Funds) to provide a turnkey system. For more information, please visit www.RyanALM.com.
Media contact:
Tucker Hewes, Hewes Communications, Inc., (212) 207-9451, tucker@hewescomm.com
For Additional Information or Licensing Information Contact:
Michael Larsen
Research Affiliates
larsen@rallc.com
949-325-8777
5 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - February 10, 2010
Award-Winning Methodology Continues to Outperform Traditional Cap-Weighted Indexes
Newport Beach, CA, November 18, 2009 -- Research Affiliates LLC today announced that the United States Patent and Trademark Office has approved the issuance of U.S. Patent No. 7,620,577 for the company's innovative Research Affiliates Fundamental Index® ("RAFI®") indexing methodology, which selects and weights securities using fundamental metrics of company size rather than by market capitalization.
"We are deeply gratified that the United States Patent and Trademark Office has awarded us this patent," said Robert Arnott, chairman and founder of Research Affiliates. "Our business model differs from most registered investment advisors, in that our core business is developing and licensing new product ideas. So, unlike most asset managers, we have only our ideas to sell; we can protect these ideas as trade secrets or with patents. As we want to encourage wide use of these ideas, we favor the latter.
"Fundamental Index® products have been a tremendous success by every significant measure. Over 20 licensed affiliates use the RAFI® concept to manage products that exceed $25 billion in assets under management, after less than five years from publication of our research. The Fundamental Index® methodology has earned prestigious industry awards, and now Research Affiliates has been granted a patent on its innovative indexing method." Mr. Arnott added, "above all else, we're pleased that the Fundamental Index® approach has produced results, on live assets, that are consistent with our research and have directly benefited investors all over the world."
FTSE RAFI® Index Series
The Fundamental Index® methodology was developed to address the structural return drag created by traditional capitalization-based indexing strategies, which systematically overweight overpriced securities and underweight underpriced securities. According to Research Affiliates' original work on the Fundamental Index® concept, the historical return drag associated with this structural flaw is typically 2% to 4% per annum, globally.
Research Affiliates partnered with FTSE to create the FTSE RAFI® Index Series in 2005. Index constituents are selected and weighted using four fundamental factors, including total cash dividends, free cash flow, total sales and book equity value. Presently, there are well over 100 FTSE RAFI® indexes, covering a broad range of global developed and emerging equity markets.
Mr. Arnott commends the indexing community, but points out an Achilles' Heel in conventional indexes, saying "index funds have served investors well for over 25 years, providing broad stock market exposure at a fraction of the price of actively managed funds. But for all their benefits, capitalization-weighted indexes suffer a structural flaw that leads to overweighting overpriced securities and underweighting underpriced securities. This failing came to a head in the 2000-2002 bear market where a relatively few stocks, notably in the technology sector, led to woeful index fund returns. The Fundamental Index concept cures this deficiency while preserving the many and substantial advantages of index fund investing. Our research shows consistent, significant long-term outperformance of the Fundamental Index® approach compared to applicable cap-weighted indexes, no matter where the equity market."
Through October 31, 2009, FTSE RAFI® indexes have outperformed their market capitalization-weighted counterparts in 41 of 45 countries, since the launch date of the indexes. The FTSE RAFI® All World 3000 has outpaced the MSCI All Country World Index® by some 4.8% per annum since FTSE first introduced these indexes in November of 2005.
Through October 31, 2009, the FTSI RAFI® 1000 Index, which comprises large cap U.S. equities, outperformed the S&P 500® by 14.39% in 2009, by 1.47% annualized for three years, and by 1.94% annualized since inception of the index. The FTSE RAFI® Developed ex US 1000 Index, which comprises large cap developed foreign market stocks, outperformed the MSCI EAFE Index® by 12.71% for 2009, by 3.48% over three years annualized, and 3.18% since inception. More information on the performance of popular FTSE RAFI® indexes and comparable indexes is available online from Research Affiliates at: http://www.researchaffiliates.com/Work%20with%20Us/Indexes/Pages/Home.aspx.
For more information contact:
Tucker Hewes
Hewes Communications, Inc.
509 Madison Avenue, Suite 904
New York, NY 10022
+1 (212) 207-9451
tucker@hewescomm.com 6 83bb5370-17e5-411b-8f09-b654b916c17c 8f928035-e01a-4012-a385-e80a08aea8b3 - November 18, 2009
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