Arnott vs. Siegel: The Fundamental Indexation Battle Begins 3 comments
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Rob Arnott has been talking about fundamental indexation for a few years now, and his firm Research Affiliates teamed up with index provider FTSE and manufacturer PowerShares to provide the first “fundamentally based” index ETF with The PowerShares FTSE™ RAFI US 1000 Portfolio (PRF).
With WisdomTree’s version of fundamental indexation based on the research of Professor Jeremy Siegel (focused on dividends, while Arnott’s version is based on four fundamental factors: book value, income, sales and dividends) launched just last month, PowerShares has countered with news of the registration with the SEC for ten new funds. Again they will be branded as PowerShares FTSE™ RAFI Portfolios but will cover nine sectors. One will cover small-mid caps. Here’s the list:
* FTSE RAFI Basic Materials Sector Portfolio
* FTSE RAFI Consumer Goods Sector Portfolio
* FTSE RAFI Consumer Services Sector Portfolio
* FTSE RAFI Energy Sector Portfolio
* FTSE RAFI Financials Sector Portfolio
* FTSE RAFI Health Care Sector Portfolio
* FTSE RAFI Industrials Sector Portfolio
* FTSE RAFI Telecommunications & Technology Sector
* FTSE RAFI US 1500 Small-Mid Portfolio
* FTSE RAFI Utilities Sector Portfolio
It will be very interesting to see the growth in assets in these funds versus those of WisdomTree. One thing that has always been an important truth in the ETF industry is that first to market matters. Consider GLD versus IAU. In this case however, there is more of a fundamental (sorry) difference between what WisdomTree and PowerShares are providing.
Side note: PowerShares is reportedly registering 31 new funds with the SEC, including those mentioned above. The vast majority of these new funds (all but 6) are sector funds. Question: Don’t we already have enough sector based ETFs? If they don’t have comparable MERs or cover new territory (geographic or otherwise), you really have to wonder. The one that really gets my interest is the Cleantech ETF. I’d like to add that to our PBW position.
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This article has 3 comments:
Single country funds seem to have been forgotten about in the innovation wave.
Btw, yours is a really great blog site ranked in my "favorites list" right up there with Ritholtz, Kirk and very few others.
At numeraire.com/download... there are documents about the fatal fallacy of dividends and other factors: WSJ letter; WSJ article; WSJ.com article, and blogs. The WSJ letter to the editor is a response to the WSJ Op-Ed article, which in turn is a response to the WSJ.com Commentary article. These documents are supported by two published articles also available at the numeraire.com webpage: IJEB in June, 2005; and AEF in May, 2006.
To facilitate fair, open discussion about this matter among interested persons, one of the linked documents (labeled "blogs") at the numeraire.com webpage includes comments by bloggers. I trust this conforms to fair use pursuant to The Chicago Manual of Style, 14/e.