Bloomberg Talks Research Affiliates Founder & Chairman Rob Arnott Talks New ETF
Sep 15, 2025
Rob Arnott, Chairman and founder of Research Affiliates, delves into his innovative ETF RAUS and the shifting landscape of passive investing. He reveals how his unique approach using the Cap-Weighted Index can enhance stock selection. Arnott discusses recent market dynamics, specifically how Russell index changes impact stocks like Dillard’s. He also proposes meaningful reforms to earnings reporting, emphasizing strategies that encourage long-term investment growth. A captivating conversation about the future of investing!
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Passive Indexes Have Hidden Active Behavior
- Conventional cap-weighted indexes hide active trading in their turnover, creating an Achilles heel.
- Slowing additions and removals based on business size boosts returns and reduces churn.
Use Patience In Index Inclusion
- Add patience to index inclusion rules by requiring businesses be large enough to matter before adding them.
- This approach lowers turnover and historically raised annual returns by about 69 basis points.
RAUS: A More Patient Form Of Passive
- RAUS aims to be more passive than many traditional indexes by reducing churn and not chasing fads.
- It keeps turnover similar to the S&P 500 but avoids buying high and selling low at extremes.