The FTSE RAFI US 1000 Index is an innovative index approach, where constituent companies are selected and weighted in the index using fundamental metrics of size – such as sales, cash flow, book value and dividends -- rather than traditional market capitalization weighting.
Rob Arnott, Chairman of Research Affiliates, has performed extensive backtesting which shows that RAFI produced nearly 20 percent higher returns than the classic capitalization-weighted indexes with four percent lower risk since 1962. Both CALPERS and the South Dakota Investment Council have shown interest in fundamental indexing as a possible way to complement their current investment strategies.
Jerry Moskowitz, Managing Director of FTSE Americas said “PowerShares will be the first to utilize the FTSE RAFI US 1000 Index as the basis for a retail investment product, and we are excited about the unique opportunity for investors. Just as FTSE is innovative in their approach to index creation, PowerShares offers innovative ETFs to the marketplace.”
Rob Arnott added “PowerShares has excellent distribution capabilities and is dedicated to delivering high quality products to investors. Using the FTSE RAFI US 1000 Index as the basis for an ETF should demonstrate that fundamental indexation can provide long-term performance superior to that of comparable cap-weighted equity indexes.”
“We are delighted that the FTSE RAFI US 1000 Index fits with our ‘Intelligent ETF’ strategy,” said Bruce Bond, President of PowerShares Capital Management. “We will be able to offer investors an innovative and alternative option to traditional market cap indexes.”
