While the emerging markets may be riskier and more volatile than other assets, investors can potentially generate greater returns. Arnott has already put his money where his mouth is, exiting all his personal U.S. allocations, except a couple of long/short strategies.
“Emerging market have shifted from interesting to really compelling,” Arnott added.
Invesco PowerShares Vice President of ETF Product Management John Feyerer also pointed out that the PowerShares FTSE RAFI US 1000 Portfolio (NYSEArca: PRF) is among the first ETFs to track a smart-beta fundamentally weighted index that single out market factors like book value, cash flow, sales and dividends in determining component weights. PRF was launched in 2005.
PRF also tries to focus on value plays and underweight expensive securities. For instance, Arnott points out that the popular Priceline (NYSE: PCLN) play makes up a 0.3% weight in the Russell 1000 index, whereas PCLN is only 0.04% of the FTSE RAFI US 1000.
Financial advisors who are interested in learning more about contrarian investing with fundamentally-weighted ETFs can listen to the for webcast here.