"Arnott Index Derided by Bogle as Witchcraft Beats Vanguard Fund," is the headline over a Bloomberg News profile of money manger Robert Arnott. From the article:
Eugene Fama, a professor of finance at the University of Chicago's Booth School of Business who helped develop the efficient market hypothesis, said Arnott's indexes represent a triumph of marketing rather than an innovation in investing. In a 2007 interview in the Journal of Indexes, Fama said they simply capture the "value effect" by using measures such as cash flow to select cheaper equities, not unlike what stock pickers do. In an e-mail in April, Fama said of Arnott's work, "My view hasn't changed."
What the article doesn't mention is that Professor Fama is a "board member of Dimensional Fund Advisors" and a consultant for Dimensional's Fixed Income and Value Strategies. In other words, he's a money manager that competes with Mr. Arnott.
Likewise, the Bloomberg article reports:
As investors started buying fundamental index funds, traditionalists publicly attacked them. Bogle, now president of Vanguard's Bogle Financial Markets Research Center, and Burton Malkiel, a Princeton University economics professor, penned a column in the Wall Street Journal in June 2006 criticizing fundamental index funds for charging higher management fees and expenses that were five to 10 times as much as those levied by traditional index funds.
Like Professor Fama, Professor Malkiel is identified by Bloomberg only with his academic affiliation. There's no mention that Professor Malkiel is the chief investment officer of Alphashares, another firm that competes with Mr. Arnott.
