Russell Investments and Research Affiliates have launched a new index series based on Research Affiliates’ fundamental index methodology, whereby components of the index are selected by fundamental measures of company size rather than market capitalization.

The measurements includes adjusted sales, operating cash flow, dividends and share buybacks.

The Russell Fundamental Index Series is comprised of 24 new indexes to offer alternative beta solutions to investors that offer a cost-effective alternative to active management. They will initially be based on the Russell 3000 Index and the Russell Global ex-U.S. Index.

“We are excited to merge our benchmark index design expertise with Research Affiliates’ notable research and product knowledge to create the innovative Russell Fundamental Index Series,” said Ron Bundy, managing director for Russell Indexes. “For investors seeking an active investment approach, these new indexes will offer much sought-after alternative beta exposures with the transparency, objectivity and broad diversification they have come to expect from the Russell Index family.”

Nonetheless, Bundy said, Russell still believes that market-capitalization indexes are the best format for benchmarketing.

“Fundamental index strategies have moved into the mainstream,” said Rob Arnott, chairman and CEO of Research Affiliates. “Major investors around the world are adding these strategies to improve portfolio efficiency and diversify their core equity portfolios.

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