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VettaFi closes RAFI Indices deal to boost fundamental indexing platform

The acquisition closed just over a month after its June announcement and expands VettaFi’s indexing business to more than $260 billion in assets tracked.

Reported · Written up by our desk · Fund Industry

ETF Trends sister outlet ETF Prime covered VettaFi’s acquisition of RAFI Indices, framing the deal as a strategic accelerator for fundamental indexing rather than a typical transaction. Host Nate Geraci spoke with Tom Hendrickson, president of TMX VettaFi, who said the parties share values around client-centrism and courage. Hendrickson noted the deal closed just over a month after VettaFi announced it in June.

Hendrickson said the acquisition takes VettaFi’s total indexing platform past $260 billion in assets, with the firm running more than 2,000 indexes through its Index Factory technology. He added that the RAFI acquisition contributed 90 new indexes and represents more than $180 billion in tracked assets.

ETF Prime also featured Rob Arnott, chairman of Syzygy Asset Management, formerly Research Affiliates, on the origins of fundamental indexing. Arnott described building the approach after observing that the median Russell 3000 stock rose 20% while the S&P 500 fell 27% after the dot-com crash, which led him to conclude that cap weighting was a core flaw in traditional indexing.

Arnott said the RAFI US index has beaten the S&P 500 in roughly 7 of the last 10 years, with annual alpha of about 2% to 2.5%. Over 13 years, he cited Schwab Fundamental U.S. Large Company ETF (FNDX) gaining 400%, versus 280% for iShares Russell 1000 Value ETF (IWD), and Hendrickson said VettaFi plans to expand index co-creation across Europe, EMEA, South America, and APAC over the next one to two years.

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