Research Affiliates

The RAFI (Research Affiliates Fundamental Index) methodology weights index constituents by a composite of four fundamental measures of company size: five-year average sales, five-year average cash flow, five-year average dividends plus buybacks, and latest book value. This severs the link between a stock's weight and its market price — cap-weighted indices mechanically overweight overvalued stocks, while the Fundamental Index avoids that structural return drag by rebalancing toward economic scale. The methodology is applied across geographies and asset classes, including equities, fixed income, and multi-asset indices, and is licensed to ETF and mutual fund sponsors.

Rob Arnott, the firm's founder, serves as Chairman and remains the primary voice of its published investment research. Chris Brightman assumed the CEO role in June 2023, overseeing the firm's commercial partnerships and strategic direction. The investment research team operates collaboratively, publishing under the Research Affiliates banner; key research leadership includes senior strategists focused on asset allocation, factor research, and the refinement of the Fundamental Index methodology. The firm's research is widely published on its website and in practitioner journals, often bearing Arnott's name as lead author.

PIMCO licenses the RAFI methodology for its PIMCO RAFI ETF and mutual fund series across developed and emerging equity markets. Charles Schwab uses the Fundamental Index for its Schwab Fundamental Index mutual funds and ETFs, covering U.S. large-company, U.S. small-company, international, and emerging market exposures. Nomura Asset Management offers RAFI-based strategies in Japan. Collectively, over $130 billion in assets tracked strategies linked to Research Affiliates' intellectual property as of the firm's last public statements.

Research Affiliates operates a research-and-licensing business model: it designs indices and trading strategies, then licenses them to asset managers who package them into funds and mandates. The firm earns royalty fees based on assets under management in those licensed vehicles. This structure means Research Affiliates does not compete with its clients, does not directly manage portfolios for end investors, and its revenue stream hinges entirely on the long-term investment merit of its intellectual property — a sharp contrast to asset managers that earn fees regardless of whether their benchmark-relative performance is driven by genuine alpha or by maintaining a cap-weighted benchmark that embeds a return drag.

Research Affiliates has published skeptical analyses of private equity's reported alpha, arguing that much of the asset class's apparent outperformance relative to public equities is attributable to leverage, illiquidity premia, and valuation smoothing rather than genuine managerial skill. The firm has also questioned whether the historical equity risk premium is a reliable forward-looking guide, publishing papers that suggest long-run equity returns may disappoint relative to bonds when valuations are elevated. These contrarian positions are consistent with the firm's broader research philosophy of challenging consensus expected-return assumptions.

In June 2023, Chris Brightman was named CEO, succeeding Rob Arnott in the firm's top executive role, while Arnott remained Chairman. Brightman had previously served as the firm's Chief Investment officer. The transition places day-to-day management and commercial leadership under Brightman while keeping Arnott deeply involved in research, client engagement, and the firm's public intellectual presence — a structure designed to institutionalize the business without severing its connection to the founder's analytical voice.

No. Research Affiliates does not act as a discretionary investment manager for institutional or individual clients. All assets linked to its strategies are held in vehicles managed by its licensing partners, such as PIMCO and Schwab. The firm's role is strictly that of researcher, index designer, and sub-advisor that provides the intellectual property and ongoing index maintenance for those vehicles. This design avoids any conflict between the firm's research output and an asset-gathering sales function.