FTSE Group and Research Affiliates today launched the FTSE RAFI index series, making real-time values, constituent stocks, composition and rebalancing methodology and rules available for a new range of non-market-cap-weighted indexes called fundamental indexing, according to a joint news release. The series comprises 24 indexes.
The FTSE RAFI 1000 index, comprising U.S. companies, shows a positive return of 34% over a five-year backtested return, compared with -8% for the S&P 500 and -4% for the FTSE US All Cap index over the same period, according to the release. Dates for that time period were unavailable. The biggest components of the FTSE RAFI 1000 index are General Electric Co., weighted at 2.74%; Exxon Mobil Corp., 2.41%; Citigroup Inc., 2.02%; Microsoft Corp., 1.73%; Bank of America, 1.65%; and Wal-Mart Stores Inc., 1.61%. Their respective FTSE US All Cap index weightings are 2.57%, 2.56%, 1.71%, 1.97%, 1.28% and 1.07%.
FTSE, in partnership with Research Affiliates, hopes to license the indexes to investors including mutual funds, exchange-traded funds and managers offering enhanced active strategies.
PowerShares Capital Management will be the first to index assets to the FTSE RAFI index, launching an ETF on the New York Stock Exchange in December, said Lynn Sims, FTSE spokeswoman. Bruce Bond, PowerShares president, and Benjamin Fulton, senior vice president-product development, were unavailable to comment.
Fundamental indexing, developed by Robert D. Arnott, Research Affiliates chairman, selects, ranks and weights companies not by market capitalization like traditional market indexes "but by financial fundamental measures of company size — including sales, cash flow, book price and dividends," according to the release. Mr. Arnott declined to comment