Rob Arnott turned the world of passive index investing upside down. Best known for creating “smart beta,” Arnott creates models weighted b y four factors: Sales, profits, book value and dividends. Market cap is not relevant to him.

Funds running Arnott’s models manage about $200 billion dollars in smart-beta strategies. Assets have increased by 59 percent last year.

You can stream the full interview — radio + podcast — with Arnott here; we should have the MP3 of the interview up later this week.

This is the second episode in our new series “Masters in Business” that I’ve created with Bloomberg Radio and Bloomberg View. Our goal is to turn the usual Wall Street interview show upside down by ignoring short-term market concerns and focusing instead on how some of the modern masters in business and finance developed their personal philosophies and strategies.

You can listen to “Masters in Business” on Bloomberg AM on weekends and nationally on Sirius XM channel 119. Listen to last week’s interview with Jeff Gundlach on SoundCloud, and check back next week for a chat with Arthur Levitt.

 

 You should listen to this despite that terrible picture . . .

Category: Financial Press, Index/ETFs, Investing, Psychology

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2 Responses to “Masters in Business: Rob Arnott of Research Affiliates”

  1. tigerlilac says:

    Compare the common sense of Ritholtz and Arnott with what we have seen from Jim Cramer over the last few days and months. Forget that Cramer almost never recommends a stock until it already on the move up. Now, Cramer is spinning like a top at virtually any and every geopolitical movement. If the market was a swimming pool, Jim would throw you in the deep end and then scream at you not to swim.

  2. kcarver says:

    I intuitively like the smart beta approach and do not question the research. However, Rick Ferri does relate some caveats. I am still trying to get my mind around the notion that smart beta must carry higher risk or volatility according to the risk/reward tenent inherent in markets.

    http://www.forbes.com/sites/rickferri/2014/01/30/the-dark-side-of-smart-beta/