Research Affiliates announced the launch of new RAFI Multi-Factor and Single-Factor Indices.
Building on Research Affiliates’ latest research on equity factors, the RAFI Multi-Factor index suite aims to provide diversified exposures through allocations to the factor strategies of value, low volatility, quality, momentum and size.
“Our new RAFI Dynamic Multi-Factor strategy addresses two critical weaknesses in many existing multi-factor portfolios: first, they may hold too much in a factor that is trading at high valuations relative to its history, and second, they work well only on paper, without regard to turnover, trading costs, and or capacity,” Rob Arnott, Chairman and CEO, Research Affiliates, said in a statement.
In a series of publications last year, Research Affiliates shared its insights on why it believes “emphasizing factors or strategies that are trading cheap relative to their own historical norms” and “de-emphasizing the more expensive factors or strategies” can improve performance.
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Now, with the new RAFI Multi-Factor and Single-Factor Indices, Research Affiliates offers a product that reflects these insights.
The indices combine five single-factor strategies — RAFI Value Factor Index, RAFI Low Volatility Factor Index, RAFI Quality Factor Index, RAFI Size Factor Index and RA Momentum Factor Index.
“From the hundreds of published factors purporting to predict equity returns, we have identified the few we believe can provide market-beating performance,” Chris Brightman, chief investment officer at Research Affiliates, said in a statement. “Our new multi-factor strategies, along with the new single-factor RAFI indices, provide a comprehensive suite that we have conviction will benefit investors.”
The RA Momentum Factor Index will not be available outside the RAFI Multi-Factor index suite due to the high turnover and high trading costs of the strategy as a stand-alone index. The other four single-factor strategies will be available in a variety of geographic categories, providing investors a wide range of choices to meet their unique preferences.
These indices will be published through RAFI Indices LLC, a subsidiary of Research Affiliates Global Holdings LLC, and calculated by Solactive AG.
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