Research Affiliates

22 Pages Posted: 30 May 2017

See all articles by Richard B. Evans

Richard B. Evans

University of Virginia - Darden School of Business

Rick Green

University of Virginia - Darden School of Business

Abstract

Towers Watson (TW) has always conducted its own research into alternative approaches to market cap investing. A senior investment consultant with TW, impressed by a recent presentation by the CIO of Research Affiliates (RA) about an innovative investing concept called the “Fundamental Index methodology,” thinks it might be an important innovation in applying nonmarket cap approaches. But he has some concerns about the approach and whether or not it would be appropriate for TW's clients who depend on the firm to keep them on the cutting edge of institutional investing.

Excerpt

UVA-F-1662

Rev. Aug. 8, 2012

RESEARCH AFFILIATES

To add value we don't have to analyze companies or forecast the future, as long as we have a disciplined strategy that can capture a superior risk premium.

—Research Affiliates Chairman Robert D. Arnott

Sitting in the conference room of the Towers Watson (TW) London office, Philip Tindall thought about that morning's presentation from Jason Hsu, CIO of Research Affiliates (RA). Hsu had discussed an innovative investing concept called “Fundamental Index methodology.” Over many years, TW had conducted its own research into alternative approaches to market-cap investing and already had a positive view. While Tindall was impressed by the presentation and thought that the investment strategy suggested by RA might be an important innovation in applying non-market-cap approaches, he was concerned about the approach and whether or not it would be appropriate for TW clients. An investment consultant to some of the largest pension funds and endowments in Europe and the world, when TW spoke, investors listened. At the same time, although clients depended on TW for keeping them on the cutting edge of institutional investing, recommending an untried investment strategy and deviating from status quo investment practice could either generate outperformance relative to its investment consulting competitors and attract new clients or result in underperformance and defection of its clients to those competitors.

. . .

Keywords: market cap investing, investment strategy, institutional investing

Suggested Citation

Evans, Richard B. and Green, Rick, Research Affiliates. Darden Case No. UVA-F-1662. Available at SSRN: https://ssrn.com/abstract=2974484

Richard B. Evans (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4030 (Phone)
434-243-7680 (Fax)

HOME PAGE: http://faculty.darden.virginia.edu/evansr/

Rick Green

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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