Rob Arnott on Indexing

A recent article in Barron’s outlines recent research by “modern-day Socrates” Rob Arnott, founder of Research Affiliates, which suggests “index-fund managers are willfully ignoring low-hanging alpha—the ability to beat the market—in order to slavishly hew as closely as they can to the capitalization-weighted indexes they track.” Arnott’s analysis of S&P 500 index data from 1989 to 2017 shows that the stocks added to the index underperformed those that were “kicked out” by an average of… Read More

Value Indexing: Don’t Chase Performance

In a recent interview conducted by Alex Bryan of Morningstar, Research Affiliates’ John West, head of client strategies, discussed a different approach to value investing in which holdings are weighted based on fundamental metrics such as book value and sales rather than market capitalization. West shared insights concerning the motivation behind the process and how it comprises a value approach: The motivation, West says, came from the tech bubble during which cap weighting of overpriced… Read More