Research Affiliates

Plausible Performance: Have Smart Beta Return Claims Jumped the Shark?

The smart beta exchange-traded product marketplace is crowded and extremely competitive. To gain attention, some rather hefty performance claims are being made. We examine live US mutual fund track records over the last 40 years to gain an intuition into how much outperformance is reasonable for the most superior smart beta strategy or active manager. We call this return “plausible outperformance.”

Standing Alone Against the Crowd: Abandon Value? Now?!?

The evidence and intuition underlying a contrarian value investing discipline has proven merit in cycle after cycle across history. When value becomes cheap, it almost always and everywhere comes back as an outperforming investment strategy. If history is a guide, now is the time to increase allocations to value strategies.

2019 Investment Symposium

Past Is Not Prologue

Chasing returns can be very costly. High valuations can go higher, but not indefinitely. At Research Affiliates’ recent London Symposium, Rob Arnott explains how the link between starting valuations and subsequent returns is powerful, and examines which investments look attractive today.

2019 Advisor Symposium

Implementation Matters in ESG Investing Too

Feifei Li explains the importance of portfolio construction in an ESG portfolio using a carbon footprint example in her Advisor Symposium presentation.

Research Affiliates - CEO, Katrina Sherrerd

CEO Spotlight

Building a Sustainable Culture

Because cognitive diversity is conducive to better decision making, firms that embrace it tend to produce better outcomes for their investors. Katrina Sherrerd discusses how improved outcomes are being increasingly linked to a sustainable and high-functioning culture.

RA Conversations

RA Conversations

What Is Quality?

Jason Hsu and Vitali Kalesnik discuss which definitions of the quality factor are robust and have been shown to generate a return premium. Their findings suggest a link between the quality factor and ESG investing.

RA Conversations

The Inverted Yield Curve and Stock Returns

Cam Harvey explains the link between the yield curve inversion and future stock returns as well as why value offers investors a potential hedge against downside risk after a yield curve inversion.

See more RA Conversations

Webinar

Webinar Replay

RAFI in a Growth-Dominated Global Market

In a 45-minute webinar, Rob Arnott and Ari Polychronopoulos discuss the performance of RAFI and value in the context of the longest bull market for growth stocks in history.

Insights from Senior Leadership

Rob Arnott on Bloomberg

Rob Arnott explains why Research Affiliates expects US equities to return only 1% above inflation over the next decade—but emerging markets offer more promising long-term returns.
February 5, 2019

The Winning Formula: Mission + Culture + Team

CEO transitions are a great time to focus on refining the enduring formula of a firm’s success. Katrina Sherrerd's 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.

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

Alice’s Adventures in Factorland

Over the last 15 years, factor returns have not delivered on investors’ expectations. Are factors broken or far riskier than investors believe? Investors could dismiss the approach based on recent poor performance, but perhaps a better path would be to gain an understanding of three risks associated with factor investing. Doing so can help investors form more realistic return expectations.

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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

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Backtesting Protocol in the Era of Machine Learning

Machine learning provides the investment industry with a new set of tools. However, investors need to be cautious. Machine learning is being hyped and sometimes misapplied.

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

Recently Published Journal Papers

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, Tzee Chow, and Denis Chaves.

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.

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.

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.