Index provider Research Affiliates recently received a patent for selecting securities based on fundamental measures.
According to the WSJ article Indexing Patent Tests Fund Firms, the merits of fundamental indexing versus more traditional indexing methods have been debated in recent years. Regardless of the debate, fundamental indexing has proved popular. Total assets tracking Research Affiliates RAFI indexes total $27 billion, up from $17 billion at the beginning of 2009.
Asset growth has followed strong performance. The FTSE RAFI US 1000 Portfolio (PRF) is up 31% in the first 10 months of 2009, compared to 17% for the S&P 500. The fund selects companies based on four fundamental measures of size: book value, cash flow, sales and dividends.