The ETF, which a news release said is the first dedicated fund that
offers a long/short strategy based on Research Affiliate’s Fundamental
Index (RAFI) methodology, listed on NYSE Arca December 9.
According to the announcement, the RAFI approach uses fundamental measures of company size—sales, dividends, cash flow and book value— instead of security price in selecting and weighting securities. The new ETF seeks to match the performance of the RAFI US Equity Long/Short Index before fees and expenses.
The firm said the Index takes long positions in companies with large RAFI weights relative to their capitalization weights and short positions in companies with small RAFI weights relative to their capitalization weights. By allocating an equal dollar amount to its long and short positions, the Index is designed to generate an absolute return over a full market cycle.