Fundamental vs. Cap-weighted: The Index Smackdown

Pam Black has been writing and editing financial stories for 25 years. A former editor at Business Week, Worth, Individual Investor and Folio: and a senior financial writer at J.P. Morgan, her work has appeared in Barron’s, The New York Times Magazine, Smart Money, The New England Financial Journal, Bottom Line and Ladies Home Journal. She is a graduate of the University of Wisconsin-Madison and the Columbia Graduate School of Journalism.

Rob Arnott has authored over one hundred articles for refereed journals such as the Financial Analysts Journal, the Journal of Portfolio Management and the Harvard Business Review. He has received five Graham and Dodd Scrolls or Awards, awarded annually by the CFA Institute for the best articles of the year, and declined a sixth award during his tenure as editor. He was awarded two Bernstein-Fabozzi/Jacobs-Levy awards, by the Journal of Portfolio Management and Institutional Investor.

In 2002, he joined forces with PIMCO, serving as a subadvisor, to offer the first global asset allocation product to make active use of alternative markets, beyond conventional stocks, bonds and cash. More recently, he introduced the concept of Fundamental Indexation, built on a theoretical foundation which challenges some of the core assumptions of modern finance. For this product area, he has partnered with Claymore, FTSE, IPM, Nomura Asset Management, PIMCO, PowerShares, Pro-Financial Asset Management and Charles Schwab to name a few.

He previously developed quantitative asset management products and teams as Chairman of First Quadrant, LP, as global equity strategist at Salomon (now part of Citigroup), President of TSA Capital Management (now part of Analytic) and as Vice President at The Boston Company (now PanAgora).

He has also served as a Visiting Professor of Finance at UCLA, on the editorial board of the Journal of Portfolio Management and two other journals, and on the product advisory board of the Chicago Board Options Exchange and two other exchanges. He graduated summa cum laude from the University of California in 1977 in economics, applied mathematics and computer science. He is also Editor Emeritus for Financial Analysts Journal.

Related Links:

• Research Affiliates
• Fundamental Indexation
• What Cost "Noise"?
• Fundamental Indexes™: Current and Future Applications

George U. “Gus” Sauter is the chief investment officer and a managing director of Vanguard. As chief investment officer, he is responsible for the oversight of approximately $875 billion managed by Vanguard’s Fixed Income and Quantitative Equity Groups. The funds managed by these two investment groups include active quantitative equity funds, equity index funds, active bond funds, index bond funds, and money market funds.

Mr. Sauter is a member of the equity markets committee of the Investment Company Institute, the Council on the Graduate School of Business of the University of Chicago, and the advisory board of the Journal of Investment Management Conference Series.

He is a past member of the Institutional Traders Advisory Committee of the New York Stock Exchange and the NASDAQ Quality of Markets Committee. He also has served on the trading committee of the Securities Industry Association and the AIMR Best Execution Task Force.

Mr. Sauter joined The Vanguard Group in 1987. Previously, he was a trust investment officer with The First National Bank of Ohio.

He received his A.B. in economics from Dartmouth College and an M.B.A. in finance from The University of Chicago.

Related Links:

• Vanguard - Financial Advisors
• The Case for Indexing
• Active Equity Management: Examining the Differences Between Fundamental and Quantitative Strategies
• Fundamental indexing superiority disputed