RAFI partners with BNP in diversity smart-beta strategy


Research Affiliates of the US, which this year opened an Australian office, has partnered with global manager and securities servicing firm BNP Paribas and a specialist governance information provider to launch its latest smart-beta strategy – ‘RAFI Diversity & Governance’.

The specialist information provider, with the unlikely name ‘LeaderXXchangeSM’, is an organization that advises and promotes diversity and sustainability in governance, leadership, and investment. The firm’s methodology involves publicly available data from companies as well as proprietary databases from a Paris-based ESG provider, Vigeo Eiris.

Katy Sherrerd, the chief executive of Research Affiliates, said last week: “We believe this focus creates an environment that promotes collective intelligence and ultimately strengthens the foundation of our firm. Thoughtfully designed investment products that can improve performance and/or reduce risk, while delivering on socially conscious and sustainable investing, are a natural outcome of this focus.”

Studies show that companies with a greater percentages of women in leadership roles have the potential to improve financial performance. When women are under-represented in leadership, the company will often be less equipped to handle business challenges, understand customer needs, and approach problems from a different perspective.

Sophie L’Helias, president of LeaderXXchange, said in a statement: “Our gender-diversity metrics attempt to address this by focusing on a company’s commitment to promoting women and its results throughout the corporate leadership pipeline in management, the C-suite, and the company’s board.”

Gender diversity metrics and good governance are fundamentally linked. We are very proud to have been selected as the ESG data provider for the new RAFI Diversity & Governance strategy. It offers a unique and holistic approach that combines qualitative and quantitative performance to the investment community.”

BNP Paribas is a leader in ESG and impact investing globally. The firm will support and distribute the Research Affiliates strategy. BNP has become an exclusive provider of structured products off the new RAFI index and is a counterparty for the OTC swaps.

Sherrerd, who took over from Research Affiliates founder Rob Arnott as chief executive in August, said: “Research shows that diverse teams who embrace collective intelligence make better decisions and are more innovative. Validating this finding in investment returns is handicapped by the lack of data. For RAFI Diversity & Governance, we combine diversity with other measures, particularly financial discipline, to create a better proxy for sound management practices, robust corporate governance, and a healthy company culture.” Arnott remains executive chair of the Californian-based firm.

– G.B.