Executive Summary
Vince Lowry

Three years ago, the concept of re-weighting equity indexes by economic factors rather than by price or capitalization arrived with considerable debate. The back testing of this concept alone required every serious investor to evaluate the concept. Today, economic weighting of indexes has moved from concept to active investment strategies. Both back tested and active portfolios have provided overwhelming empirical data that economic weighted equity indexes provide investors better returns with less risk.
The success of economic weighted indexes is too compelling to ignore. Many plan sponsors are faced with squeezing additional returns from investment assets in a low return environment. Too often the plan sponsor increases their risk budget to achieve additional returns from the asset base. Now there appears to be increased alpha embedded in the index simply by re-weighting traditional indexes in order to increase returns, rather than increase the risk budget of investor portfolios. The evidence derived from 100 years of equity market behavior points to slower growth in equity prices over the next decade. What better time than now to explore the alpha under our nose.

VTL Associates specializes in investment consulting services for:

•   Public Funds
•   Endowments and Foundations
•   Corporate Pension Plans
•   Operating Accounts
•   Insurance Companies

VTL Associates strives to add value by:

•   Seeking to maximize returns for each client's portfolio
•   Designing and implementing an optimal asset allocation strategy
•   Assisting in negotiating fees with investment managers
•   Reducing overall consulting costs

VTL Associates believes that creating the optimal asset allocation structure for a client's portfolio from the outset of any client relationship is a critical step within the investment management process.