The RAFI Single-Factor Indices offer concentrated
Value, Low Volatility, Quality, and Size factor strategies.
RAFI Value Factor
The RAFI Value Factor Index is a concentrated value strategy that selects securities by their ratio of fundamentals to capitalization weight.
The value premium delivers because performance chasers under-own value securities, preferring fast-growing glamour stocks.
RAFI Low Volatility Factor
The RAFI Low Vol Factor Index is a concentrated low-volatility strategy that selects securities using a systematic risk measure.
The low-volatility premium delivers because investors’ preference for gambling leads them to over-own high-volatility securities, effectively as lottery tickets.
RAFI Quality Factor
The RAFI Quality Factor Index is a concentrated quality strategy that uses the combination of high profitability and low investment to select quality stocks.
The quality premium delivers because investors are attracted to the glamour of empire-building companies and underappreciate conservative capital allocators with wide economic moats.
The RAFI Size Factor Index equally allocates to four factors – value, low volatility, quality, and momentum – within the small universe.
The preceding factor premiums (Value, Low Volatility, Quality, and Size) tend to work better in small-capitalization markets because these markets tend to be less efficient and experience larger pricing errors.
The RAFI Single-Factor Indices offer concentrated
Value, Low Volatility, Quality, and Size factor strategies.
RAFI Value Factor
The RAFI Value Factor Index is a concentrated value strategy that selects securities by their ratio of fundamentals to capitalization weight.
The value premium delivers because performance chasers under-own value securities, preferring fast-growing glamour stocks.
RAFI Low Volatility Factor
The RAFI Low Vol Factor Index is a concentrated low-volatility strategy that selects securities using a systematic risk measure.
The low-volatility premium delivers because investors’ preference for gambling leads them to over-own high-volatility securities, effectively as lottery tickets.
RAFI Quality Factor
The RAFI Quality Factor Index is a concentrated quality strategy that uses the combination of high profitability and low investment to select quality stocks.
The quality premium delivers because investors are attracted to the glamour of empire-building companies and underappreciate conservative capital allocators with wide economic moats.
The RAFI Size Factor Index equally allocates to four factors – value, low volatility, quality, and momentum – within the small universe.
The preceding factor premiums (Value, Low Volatility, Quality, and Size) tend to work better in small-capitalization markets because these markets tend to be less efficient and experience larger pricing errors.
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