RAFI Multi-Factor

RAFI Multi-Factor is a smart beta equity strategy that offers diversified factor exposures through allocations to value, low volatility, quality, momentum, and size.

AT A GLANCE

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Uses theoretically and empirically robust single-factor strategies

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Diversifies factor exposures for a smoother ride

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Implements a rules-based and transparent index construct

For investors seeking a rules-based, transparent multi-factor strategy, RAFI Multi-Factor is designed to offer the following benefits:

  • Combines theoretically sound and empirically robust single-factor strategies—value, low volatility, quality, momentum, and size—that allow for straightforward performance measurement and governance.
  • Diversifies exposures to factors expected to produce long-term positive excess returns.
  • Offers a dynamic allocation process that can potentially improve excess returns.

The RAFI Dynamic Multi-Factor strategy dynamically allocates to value, low volatility, quality, momentum, and size based on long-term reversal and short-term momentum. This strategy is designed for investors who are concerned with the rising valuations of certain factors.

Most of the underlying strategies—RAFI Value Factor Index, RAFI Low Volatility Factor Index, RAFI Quality Factor Index, and RAFI Size Factor Index—are also available on a stand-alone basis to provide investors with a range of choices to meet their unique preferences.

The RA Momentum Factor Index is not available on a stand-alone basis due to its high turnover, high trading costs, and low capacity.

Multi-Factor Strategies

RAFI Dynamic
Multi-Factor

Dynamically allocated between value, low volatility, quality, momentum, and size

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RAFI
Multi-Factor

Equally allocated to value, low volatility, quality, momentum, and size

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RAFI Multi-Factor Climate Transition

Offers diversified factor exposures and integrates objectives related to greenhouse gas emissions reductions.

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Single-Factor Strategies

RAFI Value Factor Index

A concentrated value strategy that selects securities by their ratio of fundamentals to capitalization weight.

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RAFI Quality Factor Index

A concentrated quality strategy that uses the combination of high profitability and low investment to select quality stocks.

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RAFI Low Volatility Factor Index

A concentrated low-volatility strategy that selects secruties using a systematic risk measure.

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RAFI Size Factor Index
 

Equally allocates to four factors—value, low volatility, quality, and momentum—within the small universe.

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Related Content

Trade-Off in Multifactor Smart Beta Investing: Factor Premium and Implementation Cost
By Feifei Li, Joseph Shim

The authors study the impact of the inclusion of the momentum and size factors, and the selectiveness in stock screening, on the performance and implementation cost of a multifactor strategy. Published in the Journal of Portfolio Management.

Transaction Costs of Factor-Investing Strategies
By Feifei Li, Tzee Chow, Alex Pickard, Yadwinder Garg
Although hidden, the implicit market impact costs of factor investing may substantially erode a strategy’s expected excess returns. The rebalancing data of a suite of large and long-standing factor-investing indexes are used in this study to model these market impact costs. Published in the Financial Analysts Journal.
What Is Quality?
By Vitali Kalesnik, Engin Kose, Jason Hsu
Unlike standard factors, such as value, momentum, and size, “quality” lacks a commonly accepted definition. Practitioners, however, are increasingly gravitating to this style factor. Published in the Financial Analysts Journal. Winner of the 2019 Graham and Dodd Top Award.
Alice’s Adventures in Factorland: Three Blunders That Plague Factor Investing
By Rob Arnott, Vitali Kalesnik, Campbell Harvey, Juhani Linnainmaa
Factor investing has failed to live up to its many promises. Its success is compromised by three problems that are often underappreciated by investors. Winner of the 2020 Bernstein Fabozzi/Jacobs Levy Award for Outstanding Article.