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Exchange Traded Funds Make A Push Into Fundamental Indexing

August 31st, 2009

exchange-traded-funds“Several providers of exchange-traded funds have made a big push into fundamental indexing. For example, PowerShares offers a family of funds based on fundamental indexes, led by PowerShares FTSE RAFI US 1000 (PRF). The funds are based on work by the father of fundamental indexing, Robert Arnott, who relies on earnings, revenue, cash flow and book value to weight stocks,” Bob Frick Reports From Kiplinger.

“Another firm, WisdomTree, sponsors ETFs that weight companies mainly according to the cash dividends they pay out. Stocks of dividend-paying companies, it maintains, do better over time. RevenueShares markets funds that weight companies according to their gross sales, an approach that has the effect of overweighting companies with low price-to-sales ratios. Over time, RevenueShares says, shares of such companies perform better than more-expensive stocks,” Frick Reports.

“The short-term results of most RevenueShares ETFs have been terrific. For example, from the stock market’s bottom on March 9 through August 27, RevenueShares Large Cap (RWL), the ETF that competes most closely with S&P 500 index funds, beat the index by ten percentage points; RevenueShares Mid Cap (RWK) beat its bogey by 21 percentage points,” Frick Reports.


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