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.


 

Investment Process

RAFI Multi-Factor Investment Process

At a Glance


 

Uses theoretically and empirically robust single-factor strategies

Diversifies factor exposures for a smoother ride

Implements a rules-based and transparent index construct

Offers a dynamic allocation process for potentially improved returns

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 Multi-Factor strategy uses an equally weighted blend of five factors: value, low volatility, quality, momentum, and size.

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. 


 

About the RAFI Multi-Factor Suite

RAFI Dynamic Multi-Factor Indices dynamically allocate between value, low volatility, quality, momentum, and size.

RAFI Multi-Factor Indices equally allocate to value, low volatility, quality, momentum, and size.

About the RAFI Single-Factor Suite

RAFI Value Factor Index is a concentrated value strategy that selects securities by their ratio of fundamentals to capitalization weight.

RAFI Low Volatility Factor Index is a concentrated low-volatility strategy that selects securities using a systematic risk measure.

RAFI Quality Factor Index is a concentrated quality strategy that uses the combination of high profitability and low investment to select quality stocks.

RAFI Size Factor Index equally allocates to four factors—value, low volatility, quality, and momentum—within the small universe.

RA Momentum Factor Index uses multiple measures of momentum: standard momentum, idiosyncratic momentum, and fresh momentum. The RA Momentum Factor Index is not offered on a stand-alone basis.


 

Related Content

Recent Insights
Why Factor Tilts Are Not Smart “Smart Beta” Arnott, Clements, Kalesnik / May 2017
A Smart Beta for Sustainable Growth Brightman, Clements, Kalesnik / July 2017
The RAFI Fundamental Index Approach
Fundamental Indexation Arnott, Hsu, Moore / Financial Analysts Journal / March 2005
An Overwrought Orthodoxy Arnott / Institutional Investor / December 2006
Robustness of Factors
Finding Smart Beta in the Factor Zoo Hsu, Kalesnik / July 2014
Will Your Factor Deliver?... Beck, Hsu, Kalesnik, Kostka / Financial Analysts Journal / September 2016
Smart Beta Strategies and Factor Exposures
A Survey of Alternative Equity Index Strategies Chow, Hsu, Kalesnik, Little / Financial Analysts Journal / September 2011
The Surprising Alpha from Malkiel's Monkey... Arnott, Hsu, Kalesnik, Tindall / Journal of Portfolio Mgmt. / August 2013
The Effects of Valuations on Smart Beta
How Can "Smart Beta" Go Horribly Wrong? Arnott, Beck, Kalesnik, West / February 2016
To Win with "Smart Beta" Ask if the Price Is Right Arnott, Beck, Kalesnik / June 2016