Right now, AAI’s two highest 10-year expected return forecasts are for large-cap value equity strategies outside the United States—Emerging Markets RAFI and Dev ex US Large RAFI. AAI’s expected return model anticipates valuations for equity strategies to mean revert and therefore tends to elevate out-of-favor regions and styles, predicting higher future returns for recently underperforming equity indices.

Investing is an exercise in decision making under uncertainty. No single signal—no matter how intuitive or well supported by history—captures the full complexity of markets.

Whether these diversified firms can maintain their positions indefinitely is an open question, but market history suggests the competition always catches up.

The RAFI™ Fundamental Index has a value tilt, but to characterize it as a value index would be an oversimplification that misses the important advantages that the fundamental index offers above standard “value” index approaches.

Smart beta strategies have endured a prolonged stretch of disappointing results, falling short of investor expectations. This article explores the underlying causes of that performance and outlines why the conditions ahead could be more favorable.

In smart beta, we find that factor returns—net of changes in valuation levels—are much lower than recent performance suggests. In fact, many of the most popular new factors (some 458 at last count) have succeeded solely because they have become more expensive.

In a series of articles we published in 2016, we show that relative valuations predict subsequent returns for both factors and smart beta strategies in exactly the same way price matters in stock selection and asset allocation.