The Berkshire Special 2018

"Unlike in the past where EMs magnified US market swings, they face less downside risk now"

Research Affiliates’ Rob Arnott talks about bubbles, Smart Beta and the risk to the US market

Published 4 years ago on May 29, 2018 13 minutes Read
Getty Images

Rob Arnott is not a typical manager who manages money for investors, instead the 63-year-old founder and CEO of the California-based Research Affiliates runs a research-heavy outfit that offers investment strategies to fund management firms and index providers. Advising over $160 billion in institutional investment assets, including the likes of Pimco, Invesco PowerShares, and Charles Schwab, Arnott’s tryst with finance began when his parents, both PhDs, bought him a stock when he turned nine. Arnott soon turned out to be a force to reckon with when he demonstrated why market cap-weighted indices made for a poor alternative to fundamental indexing, in what came to be known as ‘Smart Beta’. Arnott believes it’s not market cap but a blend of fundamental metrics such as sales, cash, book value and dividends that deliver value for investors. The avid collector of vintage bikes, who considers those models unique, believes that though the US is heading into a long-term bear market over the next five years, the downside risk for EMs is limited.