Concentration Risk A 'Serious Issue': Rob Arnott

Research Affiliates announced the sale of its index business to TMX Vetify to scale operations while launching the RAUS ETF, a low-cost fund that outperformed the S&P 500 by 170 basis points over 14 months by prioritizing deep value fundamentals over market cap weighting. The fund's strategy reduces concentration risk by excluding "frothy" high-multiple stocks in favor of undervalued giants, achieving significant returns with only a 5% divergence from standard index holdings. This approach challenges traditional indexing norms by aligning portfolio inclusion with business realities to mitigate the potential for asset write-offs driven by rapid technological obsolescence.