A Nasdaq newcomer is challenging some of the stock market’s most reliable benchmarks. On Friday, Research Affiliates’ index division, RAFI, introduced the Research Affiliates Cap-Weighted US ETF (NASDAQ:RAUS), an ETF that aims to replicate the market’s comfortable beat while subtly working around what its designers refer to as profound flaws in conventional index design.
Launched in collaboration with ETF Architect, RAUS follows the Research Affiliates Cap-Weighted Index (RACWI). On the surface, the approach resembles the S&P 500 or Russell 1000. But rather than using just market capitalization to determine which names pass the threshold, RACWI uses fundamentals: sales, cash flows, shareholder dividends, and book value, before resorting to cap-weighting.
