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APRIL 2018

Research Affiliates Launches New RAFI ESG Strategy

•  RAFI ESG complements traditional ESG metrics with measures of financial discipline and diversity for improved return potential.

•  RAFI ESG utilizes the return-enhancing engine of fundamental weighting.

•  RAFI Indices, LLC, will publish and license the RAFI ESG Index series.

•  For more information on the index series, visit rafi.com/esg.


Research Affiliates announces the launch of new RAFI ESG Strategy

RAFI ESG is a thoughtfully designed smart beta strategy that aims to help investors achieve the dual objectives of social responsibility and long-horizon outperformance.

The strategy does this by emphasizing two key elements: (1) applying the Fundamental IndexTM approach, which has historically been shown to outperform the cap-weighted benchmark, and (2) supplementing traditional ESG metrics by adding the dimensions of financial discipline and gender diversity.

“We wanted to deliver a transparent, broadly diversified, and customizable ESG strategy without sacrificing returns,” said Vitali Kalesnik, PhD, Partner and Head of Equity Research. “Our research shows that we can achieve this objective by combining our Fundamental IndexTM approach to investing with a broader set of ESG measures—specifically, by including measures of financial discipline and diversity. RAFI ESG addresses the needs of investors seeking to make an ESG impact while preserving the potential for added returns.”

As part of Research Affiliates’ ongoing ESG efforts, the firm is collaborating with BNP Paribas, a global leader in the ESG and sustainable investing space. As an exclusive provider of structured products linked to the RAFI ESG indices, and a swap counterparty, BNP Paribas will provide marketing support for the implementation of these strategies.

“Research Affiliates is well known throughout the industry for their smart beta offerings and we are thrilled to work with them on RAFI ESG, which provides investors across regions an opportunity to invest in the concept that diversity is a key component of success for corporations.” said Neven Graillat, Head of Sustainable Investment Solutions, Global Markets, at BNP Paribas. “Sustainable investing is about finding the right balance among risk, return, and impact. RAFI ESG aligns well with this market trend by incorporating financial assessment on the return side, controversies management and global governance on the risk side, and diversity on the impact side.”

The RAFI ESG strategy takes an integrated approach to ESG investing by incorporating RAFI weights with a composite score of each security’s Environment, Social, Governance, Financial Discipline, and Diversity ratings.

The financial discipline score uses metrics that are associated with generating sustainable long-term performance. For the diversity score, metrics are used to determine a firm’s commitment to gender diversity, with particular attention paid to women in management, in the C-suite, and on company boards.

“Diversity has long been paramount at Research Affiliates. Diversity in backgrounds, ideas, and experiences leads to the thought-provoking insights that are the foundation of our firm’s collective intelligence (CI), and high CI is associated with better financial outcomes and greater innovation," says Katy Sherrerd, PhD, Research Affiliates’ President and COO.

“Together with Research Affiliates, we will continue to provide access to leading-edge quantitative investment strategies while simultaneously supporting diversity and inclusion, in particular, through public disclosure and sustainability of long-term performance,” said Hervé P. Duteil, BNP Paribas’ Chief Sustainability Officer in the Americas. “We look forward to continuing to expand the offering of market-based solutions that offer investors the opportunity to put their money to work while addressing social and environmental challenges.”

Research Affiliates also plans to launch a stand-alone RAFI Diversity strategy at a later date in 2018.

Indices based on both the RAFI ESG and RAFI Diversity strategies will be published through RAFI Indices, LLC, a sister company of Research Affiliates.

For more information, please visit www.rafi.com

About RAFI Indices

RAFI Indices, LLC, is a California limited liability company established in 2016, which is a wholly owned subsidiary of Research Affiliates Global Holdings, LLC. RAFI Indices, LLC, constructs, publishes, and licenses various indices and does not offer or provide investment advice or offer or sell any securities, commodities, or derivative instruments or products. The RAFI trademark is used under license by RAFI Indices, LLC. The RAFI Indices, LLC, corporate name and all related logos are the exclusive intellectual property of RAFI Indices, LLC.

About Research Affiliates

Research Affiliates, LLC, is a global leader in smart beta and asset allocation. Founded in 2002 and based in Newport Beach, California, Research Affiliates is dedicated to creating value for investors and seeking to have a profound impact on the global investment community through its insights and products. The firm’s investment strategies are built on a strong research base and are led by Rob Arnott and Chris Brightman. Research Affiliates delivers solutions in partnership with some of the world’s leading financial institutions through their offerings of mutual funds, ETFs, separately managed accounts, and/or commingled accounts. As of December 31, 2016, about $169 billion in assets are managed worldwide using investment strategies developed by Research Affiliates. 

Neither Research Affiliates, LLC, nor its related entities provide investment advice outside of the United States, Ireland, and Canada, and do not offer or sell any securities, commodities, or derivative instruments or products. Any such business may only be conducted through registered or licensed entities and individuals permitted to do so within the respective jurisdiction and only in conjunction with the legally required disclosure documents and subject to all legally required regulatory filings and/or exemptions.

The trademarks Fundamental Index and RAFI, and the Research Affiliates trademark and corporate name and all related logos, are the exclusive intellectual property of Research Affiliates, LLC, and in some cases are registered trademarks in the United States and other countries. Various features of the Fundamental Index methodology, including an accounting data–based noncapitalization data–processing system and method for creating and weighting an index of securities, are protected by various patents, and patent-pending intellectual property of Research Affiliates, LLC. (See all applicable US Patents, Patent Publications, Patent Pending intellectual property and protected trademarks located at https://www.researchaffiliates.com/en_us/about-us/legal.html#d, which are fully incorporated herein.)  Any use of these trademarks, logos, patented, or patent-pending methodologies without the prior written permission of Research Affiliates, LLC, is expressly prohibited. Research Affiliates, LLC, reserves the right to take any and all necessary action to preserve all of its rights, title, and interest in, and to, these marks, patents, or pending patents.

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