The Winning Formula: Mission + Culture + Team

CEO transitions are a great time to focus on refining the enduring formula of a firm’s success. At Research Affiliates that formula has three equally important elements: mission, culture, and team. The result are win-win-win outcomes—that is, a win for our end investors, a win for our distribution partners, and a win for ourselves.

RA Conversations

The Flattening Yield Curve

Cam Harvey looks at the yield curve today through the lens of his 1986 pioneering work on yield-curve inversions and their foreshadowing of economic downturns.

Further Reading 
Where Is the Global Economy Going?

Pundits Predicting Panic in Emerging Markets

Chris Brightman on CNBC

Hear Chris Brightman, Research Affiliates’ CIO, discuss his 10-year outlook for real equity returns. While he foresees the price of the S&P higher than where it is today, he expects US equity returns to be in the low single digits.
January 9, 2019

The Challenges of
Diversity Investing

The business case for diversity is compelling, but the investment case for diversity is less clear-cut. We suggest, therefore, that investors who seek to promote diversity and its business benefits combine diversity with known drivers of excess returns.

Further Reading 
Unlocking the Performance Potential in ESG Investing

Alternative Risk Premia:
Crisis or Opportunity?

We believe a solid understanding of the specific underlying return drivers of ARP strategies can improve investors’ odds of maximizing the long-run investment opportunity of ARP investing.

Further Reading 
Alternative Risk Premia: Valuable Benefits for Traditional Portfolios

Webinar Replay

What Matters in
Multi-Factor Investing?

In the first of a five-part webinar series, Vitali Kalesnik and Joe Steidl present the business case and academic framework underlying multi-factor investing, as well as the evidence supporting the most popular factors in factor investing.

Ignored Risks of
Factor Investing

Long-only factor investing, often called smart beta, can be a valuable way for investors to achieve their long-term return targets. To achieve the best outcomes, investors should have realistic expectations about the risks factors pose and be prepared to weather potentially prolonged periods of material underperformance.

Feifei Li at the Morningstar Investment Conference

Feifei Li discusses RAFI Multi-Factor, a strategy that offers diversified exposures to robust equity factors.
June 12, 2018

Vitali Kalesnik on
Bloomberg TV

Vitali Kalesnik discusses factor investing and how the ETF landscape has changed the way we talk about markets, value, and growth.
October 18, 2018

The Biggest Failure in Investment Management: How Smart Beta Can Make It Better or Worse

The biggest failure in investment management—the gap between the returns realized by the investor and the returns earned by the strategy or fund the investor owns—typically remains in the shadows with the glare of the spotlights focused on alpha.

Rob Arnott on
Bloomberg TV Asia

“Is China a bargain now?” Rob explains why China is “getting there,” and expands his commentary to include US and emerging-market stocks, and a potential US recession.
October 18, 2018

Chris Brightman on
CNBC’s Squawk Box

Listen to Chris explain why he is worried about slowing US economic momentum as a result of fading fiscal stimulus. Chris believes emerging market equities remain a good bargain for investors.
October 11, 2018

Is Your Alpha Big Enough to Cover Its Taxes? A Quarter-Century Retrospective

Recognizing that the management of taxable portfolios has advanced in the past 25 years, the authors of the present paper update a seminal 1993 study in which Robert H. Jeffrey and Robert D. Arnott introduced the concept of a normally negative “tax alpha” and formulated tactics to reduce its detrimental impact on investment results.

Smart Beta Multifactor Construction Methodology: Mixing versus Integrating

All of the well-established factors to which investors gain exposure in low-cost smart beta funds are expected to deliver a premium in the long run, but none is guaranteed to outperform at all times. Seeking diversification, many investors have turned to strategies that exploit multiple factors. Published in the Journal of Index Investing.

Hobbled by Benchmarks

Many investment organizations benchmark their funds’ performance against the classic 60/40 mix of domestic stocks and bonds, but this posture limits their ability to earn superior risk-adjusted returns. The authors argue that investors can fully realize the well-established benefits of asset-class diversification only if they are seriously willing to revisit their policy portfolios, investment guidelines, and benchmarks.

Winner of the 2018 Bernstein Fabozzi/Jacobs Levy Award for Best Article

King of the Mountain-The Shiller P/E and Macroeconomic Conditions

Valuation, always an effective tool for long-term investors, can also be useful for assessing short-term market prospects. The authors demonstrate that conditioning CAPE on current inflation and real yields substantially improves its accuracy in forecasting returns for periods from one month to one year.

Published in the Journal of Portfolio Management by Rob Arnott, Omid Shakernia, Jonathan Treussard, and Michael Aked.

Winner of the 2016 Graham & Dodd Scroll Award Of Excellence Paper

Will Your Factor Deliver? An Examination of Factor Robustness and Implementation Costs

Not every factor profits investors when implemented through a passive strategy. Size and quality show weak robustness, and liquidity-demanding factors, such as illiquidity and momentum, are associated with high trading costs. 

Published in the Financial Analysts Journal by Jason Hsu, Vitali Kalesnik, Noah Beck, and Helge Kostka.

Winner of the 2015 William F. Sharpe Award for ETF/Indexing Paper of the Year

A Framework for Assessing Factors and Implementing Smart Beta Strategies

Investors might apply advanced techniques of quantitative analysis to discriminate between genuine premium-bearing factors and the spurious products of data-mining—but here’s a three-step heuristic.

Published in the Journal of Index Investing by Jason Hsu, Vitali Kalesnik, and Vivek Viswanathan.

Winner of the 2012 William F. Sharpe Indexing Achievement Award for Paper of the Year

A Study of Low-Volatility
Portfolio Construction Methods

Long-term simulations in U.S., global developed, and emerging markets confirm that low-volatility strategies can potentially access risk-diversifying sources of excess return. However, portfolio construction methods should be sensitive to investibility and valuations.

Published in the Journal of Portfolio Management by Jason Hsu, Tzee Chow, Feifei Li, and Li-Lan Kuo.

Winner of the 2012 William F. Sharpe Indexing Achievement Award for Paper of the Year

Rebalancing and the Value Effect

Value stocks typically enjoy higher dividends than growth stocks. Growth stocks, on the other hand, typically enjoy faster dividend growth. What most investors miss is that a portfolio of value stocks generates faster growth in dividends than a portfolio of growth stocks.

Published in the Journal of Portfolio Management by Rob Arnott and Denis Chaves.