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The RAFI Fundamental US Style Index Series applies the Fundamental Index® methodology to a traditional size/style investing approach. Many investors like to make U.S. equity investments in line with Morningstar’s popular “style box” approach. For example, they allocate money to large-cap growth or small-cap value portfolios. Applying the Fundamental Index methodology to the nine style boxes result in more efficient portfolios than through traditional capitalization-weighted style indices.
Why? Traditional indices tend to overweight overvalued stocks and underweight undervalued stocks. The RAFI® approach, however, uses fundamental measures of a company’s economic footprint, avoiding market speculation and shifting sentiments that are reflected in stock prices.
We compared the performance of the RAFI Fundamental US Style Index Series to the Russell style indices, (selected as the benchmark indices because they have the longest history, since 1986, of existing style index series), are summarized below:
Index Value Add: RAFI Fundamental vs. Russell Style Portfolios |
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Growth |
Core |
Value |
| Large |
1.77% |
-0.39% |
2.62% |
| Mid |
1.17% |
0.08% |
1.73% |
| Small |
3.93% |
4.57% |
4.44% |
Notes: Simulated history for the period 1/1/1986 – 3/31/2011.
Large Company indices benchmarked to the Russell 1000 Core, Growth, and Value indices.
Mid Company indices benchmarked to the Russell Midcap Core, Growth, and Value indices.
Small Company indices benchmarked to the Russell Small-Cap Core, Growth, and Value indices.
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| Source: Research Affiliates, LLC, based on data from Bloomberg. |
More information on the RAFI Fundamental US Style Index Series can be found on these pages:
Overview | Equities | Bonds | Style | Long/Short | Performance | RAFI®
FAQ | Awards
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