NEWPORT BEACH, Calif.--(BUSINESS WIRE)--RAFI Indices, LLC, the index company of Research Affiliates, LLC, an investment advisor and global leader in smart beta, enhanced index strategies, and asset allocation, today announced the launch of the Research Affiliates Deletions Index (NIXT). This innovative index capitalizes on the long-term price reversal of companies removed from market capitalization weighted indices, providing investors with a unique opportunity.
“When an index producer adds or drops stocks from the index, they will inevitably add stocks that are popular, beloved, and expensive and drop stocks that are unloved and cheap,” said Rob Arnott, Chairman and Founder of Research Affiliates. “This was one of the original motivations for the launch of the Research Affiliates Fundamental Index (RAFI™) concept, and we now see a unique opportunity to create an index that can harness this structural alpha in a different way.”
The Research Affiliates Deletions Index employs a rules-based approach to identify small cap value stocks. It selects companies that have been deleted from market capitalization weighted indices in the past year, subject to a quality screen. This approach is designed to capture the potential for outperformance associated with out-of-favor stocks while mitigating some of the risks associated with individual stock selection.
“Underperforming stocks that get dropped by indexes are inexpensive to begin with, and price pressures caused by the index and its attendant framework only intensify their underperformance,” added Arnott. “But once dropped by the index, there is a silver lining for these stocks, they, on average, outperform the market over the next several years, creating a compelling opportunity for investors.”
For more information on the Research Affiliates Deletions Index (NIXT), visit: https://www.rafi.com/index-strategies/ra-deletions-index-series
To read our latest research titled “Nixed: The Upside of Getting Dumped,” visit: https://www.researchaffiliates.com/publications/articles/1043-nixed-the-upside-of-getting-dumped
About RAFI Indices
RAFI Indices, LLC is an index company founded in 2016 by Research Affiliates. It specializes in constructing, publishing, and licensing indices that reflect a deep, academically rigorous understanding of the fundamental factors driving capital market returns. The company is renowned for its innovative approach, offering over 49 live strategies that cater to a diverse range of investment needs worldwide. Importantly, RAFI Indices operates independently and does not offer investment advice or sell any securities, commodities, or derivative instruments.
Web: www.rafi.com
About Research Affiliates
Research Affiliates is a globally recognized investment advisor established in 2002. Its mission is to challenge conventional wisdom and revolutionize the investment community for the benefit of investors through innovative research and product development. The company offers industry-leading smart beta and enhanced indexing, quantitative active equity, and multi-asset products. Research Affiliates believes that because market prices are not perfectly efficient, systematic investment strategies can provide opportunity for improved investment performance. It partners with some of the world's largest investment managers and offers mutual funds, ETFs, commingled funds, and separately managed accounts. As of June 30, 2024, the firm has over $147 billion in assets under management through strategies developed by Research Affiliates.
Web: www.researchaffiliates.com
LinkedIn: @Research-Affiliates
Twitter: @ra_insights
