FWIW I have just updated some performance numbers on portfolios with similar factor exposure (similar expected return). The portfolios include both ETFs (Vanguard, iShares), Bridgeway, DFA, and (RAFI) Powershares. Few observations:
- - Portfolios with similar factor loads had similar portfolio returns
- There are a range options for individual investor to self-implement a global factor targeted portfolio
- The RAFI (simulated) series perform fairly well, time will tell if Powershares can implement effectively.
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ETF Sample portfolio DFA Tax-Managed Sample portfolio
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23% Vanguard Midcap Value 17% DFA TM US Marketwide Value
9% iShares S&P600 Value 7% DFA TM US Targeted Value
5% Bridgeway Ultra Small Co. 13% DFA TM US Small Cap
23% iShares EAFE Value 17% DFA TM Intl Value
5% iShares EAFE Small 11% DFA Intl Large Cap
10% Vanguard EM 10% DFA EM
25% iShares 3-7 yr Treasury 25% DFA Intermediate Government
ESTIMATED FACTOR LOADS
Size load Value load Term load
ETF Portfolio
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US equity 0.36 0.57
Non-US developed equity 0.07 0.31
EM equity 0.00 0.00
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Total equity 0.21 0.40
Fixed income 0.50
DFA Tax-Managed Portfolio
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US equity 0.40 0.57
Non-US developed equity 0.02 0.30
EM equity 0.00 0.00
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Total equity 0.21 0.40
Fixed income 0.60
ETF DFA Tax-Managed Personal
Portfolio Portfolio [Actual]
2003 35.8 36.0 36.5
2004 19.4 17.6 18.6
2005 11.7 11.4 12.7
2006 18.1 18.8 18.3
2007 5.3 7.9 7.0
2008 -27.0 -28.5 -28.7
2009 27.5 27.2 27.7
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AR 11.2 11.0 11.2
SD 20.2 20.6 20.8
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RAFI Sample portfolio DFA Core/Vector Sample portfolio
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19% P’shares FTSE RAFI US 37% DFA US Vector
18% P’shares FTSE RAFI US Small 28% DFA Intl Vector
14% P’Shares FTSE RAFI Intl 10% DFA EM Core
14% P’Shares FTSE FARI Intl Small 25% DFA 5yr Global
10% P’Shares FTSE RAFI EM
25% iShares 3-7 yr Treasury
GUESS AT FACTOR LOAD ESTIMATES
Size load Value load Term load
RAFI Portfolio
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US equity 0.35 0.35
Non-US developed equity 0.35 0.35
EM equity -0.10 0.35
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Total equity 0.30 0.35
Fixed income 0.50
DFA Tax-Managed Portfolio
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US equity 0.40 0.40
Non-US developed equity 0.40 0.40
EM equity 0.20 0.20
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Total equity 0.37 0.37
Fixed income 0.20
Simulated returns:
RAFI DFA Core/Vector
2003 42.8 41.6
2004 19.3 19.5
2005 13.6 12.2
2006 19.6 19.6
2007 10.3 6.1
2008 -27.6 -30.1
2009 37.5 32.0
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AR 14.3 12.1
SD 22.9 22.9
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The RAFI data is from Arnott’s Fundamental Index book, supplemented with data from Powershares.
- For estimates of US RAFI value and size loads see earlier estimates Arnott (slide 27), which were similar to Bernsteins, the same are assumed for Intl markets.