Diversification & Rock Bottom Valuations In the Third Pillar

Rob Arnott and Christopher Brightman of Research Affiliates recently discussed the allocation and performance of PIMCO All Asset Fund, which goes outside mainstream investments into what they describe as the Third Pillar. Arnott explains that a three-year bear market in Third Pillar investments has impacted investors’ outcomes and outlooks. Although the fund’s 7% loss from 2013 to 2015 is significantly better than the relevant benchmarks, it appears disappointing in light of the excellent performance of… Read More

Why Smart Beta May Not Be So Smart Right Now

The “smart beta” investing movement has gained a lot of followers – and fund inflows – over the past few years. But now there are signs that the influx of money into these approaches may be leading to big trouble, Validea CEO John P. Reese writes in his latest column for Canada’s Globe and Mail. While traditional index investing involves weighting holdings by their market capitalizations, smart beta approaches often use quality metrics such as… Read More

Rob Arnott of Research Affiliates Says a “Smart-Beta Crash” is “Reasonably Likely”

MarketWatch reports that Rob Arnott, chairman of Research Affiliates, says that smart beta has now become so popular that it is dangerous. Arnott, whose research helped to fuel interest in smart beta funds, says that a “smart-beta crash” is “reasonably likely.” Smart beta funds have focused on stocks with characteristics such as low volatility or high momentum, spurred on by data showing that such strategies would have yielded high returns if employed historically. Now, however,… Read More

Can Investors Time the Market By Going Against the Flow?

Yale professor Roger Ibbotson and Research Affiliates founder Rob Arnott debated the challenges and opportunities of timing the market at the 2015 Schwab IMPACT conference.  As reported by Financial Advisor, the two speakers generally agreed that “the stocks that are the most popular will do the worst, as Ibbotson said, or, as Arnott put it, “you just have to find the flows and do the opposite.” But Arnott argued for focusing on underlying valuation and… Read More

Arnott Still Sees Low Returns Ahead

While stocks have been climbing higher, fundamental indexing guru Rob Arnott of Research Affiliates hasn’t changed his outlook for the coming decade — and it’s not an optimistic one. In a recent column for MarketWatch, Mark Hulbert looks at a forecasting model Arnott uses that has been highly accurate over the past century-plus. The model forecasts stock market returns by adding together just two factors: dividend yield and real growth in earnings and dividends. “Even… Read More

Arnott: Time To Take Risk Off Table

Top fund manager Rob Arnott says that it’s becoming “embarrassing” to admit you’re a bear lately, and that means it’s time to be cautious. “If you look at advisor sentiment surveys, you find that right now there are fewer bears than have been seen in these surveys except at extreme major market tops, such as in early 2000,” he tells Yahoo! Finance’s Breakout. “When it gets to be downright embarrassing to be a bear, doesn’t… Read More