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, is pleased to announce the launch of its first ETF, the Research Affiliates Deletions ETF (NIXT) in partnership with ETF Architect, LLC. NIXT tracks the Research Affiliates Deletions Index, an index designed to capitalize on the long-term price reversal of companies removed from market capitalization weighted indices. NIXT uses a passive indexing approach and will begin trading on September 10th, 2024.
“Companies that are deleted from popular market indices are often unloved, have fallen out of favor and are no longer valuable enough to be deemed important. Perhaps somewhat counterintuitive, these companies have historically outperformed the companies that replace them in the years that follow their deletion. In a recent research piece, ‘Nixed: The Upside of Getting Dumped,’ we explore this phenomenon,” said Rob Arnott, Chairman and Founder of Research Affiliates. “RAFI Indices created an index tracking these deleted companies, and this unique strategy is a perfect fit for an ETF, as it provides structural, uncorrelated alpha executed in a simple, rules-based index format.”
The Research Affiliates Deletions Index is a contrarian small value strategy that seeks to take advantage of persistent long-term mean reversion by selecting companies removed from capitalization-weighted U.S. indices, while screening for quality. The strategy selects securities that drop out of the top 500 or top 1000 U.S. companies by market capitalization and holds those names for 5 years in an equal-weight portfolio, rebalancing annually. For the purpose of this strategy, RAFI Indices utilized its own proprietary cap-weight 500 and cap-weight 1000 indices to select index deletions from. To reduce turnover, 10% banding is used, so that a stock has to fall out of roughly the top 550 or 1100 names before we treat it as a deletion.
“Our decision in sponsoring this ETF was driven by a desire to make the index deletions strategy as accessible as possible,” said Arnott. “We also feel that the NIXT Index is uniquely complementary to many of our other strategies. Research Affiliates is always looking for new ways to bring our investment ideas to the market, whether through mutual funds, ETFs, insurance products, commingled vehicles, or SMAs.”
The NIXT strategy may be suitable for investors looking to obtain small cap value exposure. Empowered Funds dba ETF Architect, LLC is the Fund Advisor.
For more information on the Research Affiliates Deletions ETF, visit: www.nixtetf.com
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 55 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
Important Information
Investments involve risk. Principal loss is possible. Redemptions are limited and often commissions are charged on each trade. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value.
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Click here for the NIXT Prospectus and SAI. A free hardcopy of any prospectus may be obtained by calling +1.215.882.9983. Read carefully before investing.
The Fund is distributed by Quasar Distributors, LLC. The Fund’s investment advisor is Empowered Funds, LLC which is doing business as EA Advisers.
Mid-Capitalization Companies Risk. The securities of mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of larger-capitalization companies. The securities of mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.
Micro- and Small-Capitalization Companies Risk. Investing in securities of micro- and small- capitalization companies involve greater risk than customarily is associated with investing in larger, more established companies. Micro- and small- capitalization companies often have less predictable earnings, more limited product lines, markets, distribution channels and financial resources, and the management of such companies may be dependent upon one or few people.
Passive Investment Risk. The Fund is not actively managed and the Adviser will not sell shares of an equity security due to current or projected underperformance of a security, industry or sector, unless that security is removed from the Index, sold in connection with a rebalancing of the Index, or sold to comply with the Fund’s investment limitations (for example, to maintain the Fund’s tax status).
New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. There can be no assurance that the Fund will grow to or maintain an economically viable size.
Other principal risks of investing in the fund include: Risk of Investing in the U.S., Investment Risk, Equity Investing Risk, and Geopolitical/Natural Disaster Risks. For more detailed information about risks inherent in investing in the fund, please review the Prospectus.
