Research Affiliates formed separate ventures with FTSE Group and Nomura Asset Management for equity index funds based on the fundamental indexing concept, an alternative to traditional market-capitalization weighting. Fundamental indexing selects, ranks and weights equities using fundamental measures of firm size, including book equity value, sales and cash flow, rather than market capitalization, according to a Research Affiliates statement.
FTSE has a three-year agreement with Research Affiliates to license the fundamental index for the U.S. and international financial markets for investment and benchmarking products, said Robert D. Arnott, chairman of Research Affiliates and creator of its Research Affiliates Fundamental index. Nomura has a three-year agreement to market investment products based on the fundamental index to pension funds, money managers and other investors in Japan, he said.
The $197.5 billion California Public Employees' Retirement System, Sacramento, is considering fundamental indexing, said Mr. Arnott. CalPERS officials deferred comment to public affairs, whose representatives couldn't be reached for comment.
FTSE will begin publishing the USA Fundamental 1000, Global Fundamental 1000 and the global Fundamental ex-USA 1000 indexes Sept. 30. It will begin publishing fundamental indexes on Dec. 31 for Japan, the United Kingdom, Europe ex-UK, Global ex-UK, Global ex-Europe, and Global ex-Japan.