Masters in Business · Wednesday, September 2, 2026
Rob Arnott states that RAFI (Research Affiliates Fundamental Index) strategies have historically outperformed cap-weighted value indexes by 2-2.5% annually. Despite growth indexes showing higher headline returns, Arnott argues that the underlying fundamentals of value and growth portfolios have grown in parallel, with growth outperformance driven by increasing valuations rather than fundamental growth.
“If you compare it with the cap weighted value indexes, you get an astonishing result. The on average Rafi beats the cap weighted value indexes by two to two and a half percent per year compounded and does so with variability.”
“The underlying fundamentals of the value indexes in terms of sales, profits, book value, dividends, have grown roughly pari passu with growth portfolios this century to date, which shocks most people because the relative performance has been about 2% to 3% per annum for a quarter century.”
“The RAFI indexes have beat the cap-weighted value indexes by a little over 2% per year compounded.”