Last Updated March 1, 2022
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N. Intellectual Property - Copyright, Trademarks, and Patent Notices
1. Copyright, Trademark, and Patent Notices:
You acknowledge that various features of the Fundamental Index™ methodology, including an accounting data-based non-capitalization data processing system and method for creating and weighting an index of securities, are protected by various patents of Research Affiliates, LLC. (See all applicable US Patents and Patent Publications located at https://www.researchaffiliates.com/legal/disclosures, which are fully incorporated herein.) You acknowledge that “Fundamental Index™” and/or “Research Affiliates Fundamental Index™” and/or “RAFI™” and/or all other RA trademarks, trade names, and patented concepts are the exclusive property of Research Affiliates, LLC.
2. Notices and Procedure For Making Claims of Copyright Infringement:
If you believe that any Content on the Website infringes on any copyright which you own or control, you may file a notification of such infringement with us as set forth below. Notifications should include the following information:
P. Research Affiliates Asset Allocation Interactive Website
All data presented on the Asset Allocation Interactive website is based on simulated portfolio computed by Research Affiliates, LLC. The information contained within the Research Affiliates Website regarding Asset Allocation Interactive (www.researchaffiliates.com/assetallocation) may or may not represent real return forecasts for several asset classes and not for any Research Affiliates fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of Research Affiliates and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and Research Affiliates assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements.
All projections provided are estimates and are in U.S. dollar terms, unless otherwise specified, and are based on data as of the dates indicated. Given the complex risk-reward trade-offs involved, one should always rely on judgment as well as quantitative optimization approaches in setting strategic allocations to any or all of the asset classes specified. Please note that all information shown is based on qualitative analysis developed by Research Affiliates. Exclusive reliance on the above to make an investment decision is not advised. This information is not intended as a recommendation to invest in any particular asset class, product, security, derivative, commodity, currency or strategy or as a promise of future performance. Please note that these asset class and strategy assumptions are passive only—they do not consider the impact of active management. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell any securities, commodities, derivatives or financial instruments of any kind. Forecasts of financial market trends that are based on current market conditions or historical data constitute a judgment and are subject to change without notice. We do not warrant its accuracy or completeness. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, accounting, legal, tax, investment or tax advice. There is no assurance that any of the target prices mentioned will be attained. Any market prices are only indications of market values and are subject to change.
The data published herein may be simulated and in such instances, no allowance has been made for trading costs, management fees, implementation shortfalls or other costs, are not indicative of any specific investment, are unmanaged and cannot be invested in directly. Past performance, including simulated performance, is no guarantee of future performance and actual investment results may differ. Any information and data pertaining to an index contained in this document relate only to the index itself and not to any asset management product based on the index. With the exception of the data on Research Affiliates Fundamental Index™, all other information and data are generally based on information and data from third party sources. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading, but are based on the historical returns of the selected investments, indices or investment classes and various assumptions of past and future events. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Also, since the trades have not actually been executed, the results may have under or over compensated for the impact of certain market factors. In addition, hypothetical trading does not involve financial risk. No hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of the trading losses are material factors which can adversely affect the actual trading results. There are numerous other factors related to the economy or markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, all of which can adversely affect trading results.
The asset classes are represented by broad-based indices which have been selected because they are well known and are easily recognizable by investors. Indices have limitations because indices have volatility and other material characteristics that may differ from an actual portfolio. For example, investments made for a portfolio may differ significantly in terms of security holdings, industry weightings and asset allocation from those of the index. Accordingly, investment results and volatility of a portfolio may differ from those of the index referenced. Also, the indices noted in this interactive site are unmanaged, are not available for direct investment, and are not subject to management fees, transaction costs or other types of expenses that a portfolio may incur. In addition, the performance of the indices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investors should carefully consider these limitations and differences when evaluating the index performance.
No investment process is risk free and there is no guarantee of profitability; investors may lose all of their investments. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Diversification does not guarantee a profit or protect against loss. Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility. The prices of small- and mid-cap company stocks are generally more volatile than large-company stocks. They often involve higher risks because smaller companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions.
Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the value of your investment. High-yield bonds, also known as junk bonds, are subject to greater risk of loss of principal and interest, including default risk, than higher-rated bonds. Investing in fixed-income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high-yield bonds which have lower ratings and are subject to greater volatility. All fixed-income investments may be worth less than original cost upon redemption or maturity. Income from municipal securities is generally free from federal taxes and state taxes for residents of the issuing state. While the interest income is tax-free, capital gains, if any, will be subject to taxes. Income for some investors may be subject to the federal alternative minimum tax (AMT).
There are special risks associated with an investment in real estate, including credit risk, interest-rate fluctuations and the impact of varied economic conditions. Distributions from REIT investments are taxed at the owner’s tax bracket.
Hedge funds or alternative investments are complex, speculative investment vehicles and are not suitable for all investors. They are generally open to qualified investors only and carry high costs and substantial risks and may be highly volatile. There is often limited (or even nonexistent) liquidity and a lack of transparency regarding the underlying assets. They do not represent a complete investment program. The investment returns may fluctuate and are subject to market volatility so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Hedge funds are not required to provide investors with periodic pricing or valuation and are not subject to the same regulatory requirements as mutual funds. Investing in hedge funds may also involve tax consequences. Speak to your tax advisor before investing. Investors in funds of hedge funds will incur asset-based fees and expenses at the fund level and indirect fees, expenses and asset-based compensation of investment funds in which these funds invest. An investment in a hedge fund involves the risks inherent in an investment in securities as well as specific risks associated with limited liquidity, the use of leverage, short sales, options, futures, derivative instruments, investments in non-U.S. securities, junk bonds and illiquid investments. There can be no assurances that a manager’s strategy (hedging or otherwise) will be successful or that a manager will use these strategies with respect to all or any portion of a portfolio. Please carefully review the Private Placement Memorandum or other offering documents for complete information regarding terms, including all applicable fees, as well as other factors you should consider before investing.
Buying commodities allows for a source of diversification for those sophisticated persons who wish to add commodities to their portfolios and who are prepared to assume the risks inherent in the commodities market. Any purchase represents a transaction in a non-income producing commodity and is highly speculative. Therefore, commodities should not represent a significant portion of an individual’s portfolio. Buying gold, silver, platinum and palladium allows for a source of diversification for those sophisticated persons who wish to add precious metals to their portfolios and who are prepared to assume the risks inherent in the bullion market. Any bullion or coin purchase represents a transaction in a non-income-producing commodity and is highly speculative. Therefore, precious metals should not represent a significant portion of an individual’s portfolio.
Trading foreign exchange involves a high degree of risk. Exchange rates between foreign currencies change rapidly do to a wide range of economic, political and other conditions, exposing one to risk of exchange rate losses in addition to the inherent risk of loss from trading the underlying financial product. If one deposits funds in a currency to trade products denominated in a different currency, one’s gains or losses on the underlying investment therefore may be affected by changes in the exchange rate between the currencies. If one is trading on margin, the impact of currency fluctuation on that person’s gains or losses may be even greater.
Investments that are concentrated in a specific sector or industry increase their vulnerability to any single economic, political or regulatory development. This may result in greater price volatility.
Q. Research Affiliates Smart Beta Interactive Website
All data presented on the Smart Beta Interactive website is based on simulated portfolios computed by Research Affiliates LLC using data from CRSP, Compustat, Worldscope, Datastream, and Bloomberg. The portfolios shown do not represent the results of live, investable portfolios, and this content is not investment or tax advice or an offer, sale or any solicitation of any offer to buy any security, derivative or any other financial instrument. All expected return forecasts are forward-looking statements based upon quantitative models developed by Research Affiliates LLC and is not a guarantee of future performance. All past returns of the strategies and factors are not a guarantee of future performance. All transaction cost estimates are based upon quantitative models developed by RA and could differ from actual experienced transaction costs in the future. All volatility, beta, and tracking error expectations are based upon an exponential decay-weighted estimation of recent volatility, beta, and tracking error and are not a guarantee of future volatility, beta, or tracking error.
Expected return forecasts come with multiple sources of uncertainty. The expected returns model used on our Websites estimates higher expected returns when the strategy or factor is valued below its historical norm and vice versa. However, cheap strategies can always get cheaper, resulting in poor returns when our Websites projects high returns. Expensive strategies can always get more expensive, resulting in high returns when our Websites projects poor returns. The choice of expected returns model itself is also a source of uncertainty. Model parameters were estimated using a finite amount of data and are therefore subject to estimation error. Model specification choices such as when and how to shrink parameter estimates could result in different expected return outputs than are generated by the model used here.
The data sources (CRSP, Compustat, Worldscope, Datastream, and Bloomberg) used to construct and evaluate portfolios may contain multiple errors. These errors may bias up or down performance of certain strategies or factors compared to what an actual investor would have been able to achieve in the real market. Further, the simulation results ignore management fees, costs of shorting and other potentially very important elements which may make the live portfolio outcome different from the theoretically simulated portfolio. Smart beta or factor tilt investing strategies are subject to all the risks common to equity investing such as loss of capital. They are also subject to risks that are unique to smart beta investing. The choice of which factor or factors to tilt toward or away from can result in strategies that either beat or lag the market. The factors chosen for study by academics and the strategies chosen for investment allocation by practitioners are typically noticed after periods of good performance. This has at least two consequences: 1) investors are likely to overestimate the performance that a given strategy can provide over the long term and 2) good recent performers are likely to be expensive and to mean-revert to cheaper valuations, causing poor future performance. Past 5-year historical data is included on our Websites not as an indication of what to expect going forward, but to provide contrast with expected returns which are based on valuations and will often be inversely related to prior 5-year performance.
Equity factors themselves, constructed on our Websites as long/short portfolios are often not implementable and not offered as investable equity products. Nevertheless, there are risks associated with individual equity factors that are also borne by investments that tilt their holdings toward these factors. Investing in factors can subject investors to unique risks that include, but are not limited to, the following: Momentum strategies invest in recent winners that tend to continue outperforming, however when the market changes direction momentum investors are subject to a quick burst of severe underperformance known as a momentum crash. Low beta or low volatility strategies have lower absolute risk than the market, but typically come at the cost of higher relative risk and low vol strategies tend to have higher tracking error, which represents the risk that the strategy deviates from the market for extended periods of time. Value strategies often have prolonged periods of underperformance sometimes followed by quick bursts of outperformance. Value investors who reduce their value exposure following periods of value underperformance run the risk of mistiming their exposure and missing out on the periods when the value factor recovers. The profitability factor often invests in more expensive companies and high corporate profits can mean revert to lower profits in the future due to increase in competition or decrease in barriers to entry. Investing in profitable companies at any cost runs the risk of overpaying for expected future profits. The illiquidity factor earns a premium by providing liquidity but leaves illiquidity-tilted investors prone to liquidity shocks that could lead to high costs of exiting the position. The investment factor tilts toward companies with lower asset growth which could run the risk of missing out on potential growth opportunities. Tilting toward the size factor by investing in small cap stocks can provide diversification away from large caps, but often comes with higher portfolio volatility, potentially lower liquidity, and higher transaction costs.
The methodologies displayed are based upon our interpretation of the publicly available information regarding several cited indices and because all details about the construction of these mentioned indices are not publicly available, there are differences between those mentioned indices and our interpretation and application of these indices. In addition to factors – theoretical, generally hard to replicate long-short portfolios – we estimate expected risk/return characteristics for a collection of the more popular smart beta strategies. In order to produce forecasts we replicated the strategies using the published methodologies of the underlying indices. Any replication exercise is subject to deviation from the original due, in part, to differences in databases, rebalancing dates, interpretations of the written methodologies, and omitted details in the methodology description – our replication is no exception. The results of the replicated exercise albeit imprecise should be informative of the underlying strategies.
A. Information for Foreign Investors
B. Third Party Content and Sites
F. Password Security and Notification
J. Changes to the Websites and the Terms
N. Intellectual Property - Copyright, Trademarks, and Patent Notices
O. Affiliate Resource Center (ARC) Users [Limited Access]
P. Research Affiliates Asset Allocation Interactive