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Industry Spotlight > Broker Dealers

Tony Davidow, ‘Equal Weight Evangelist,’ Brings His Message to Schwab

By Joyce Hanson

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Tony Davidow is a man on a mission, carrying his message of fundamental indexing wherever he goes.

Tagged with the title of “The Equal Weight Evangelist” in the pages of Investment Advisor magazine in 2011, Davidow recently departed his post as portfolio strategist and head of the ETF Knowledge Center for Guggenheim Investments to join the Schwab Center for Financial Research as its alternative beta and asset allocation strategist.

The Schwab Center for Financial Research’s roster of experts includes stock and bond experts who are regularly cited by the media on investing issues. Familiar names on the roster include chief investment strategist Liz Ann Sonders, market and sector analyst Brad Sorensen and fixed-income strategist Kathy Jones.

Research from Charles Schwab & Co.’s Resource Center can be found here.

Since Schwab came calling late last year and he joined the firm in January, Davidow has spent a lot of time quietly working on white papers about fundamental weighted exchange-traded funds—he compares the Center for Financial Research to a think tank—but in a recent conversation with AdvisorOne, he said he looks forward to getting back on the conference circuit and getting the word out about fundamental indexing. His audiences will include both retail and institutional investors.

“At Schwab, I’m encouraged to have a free and open view of the world,” Davidow said. As Schwab’s fundamental indexing specialist, he said, his task is to “look objectively at active and passive strategies” and find the sweet spot in the middle, where indexes and fundamentals meet.

Davidow then name-checked Rob Arnott, chairman of Research Affiliates, who came up with the idea of fundamental indexes in 1999. Instead of weighting stocks in an index by their capitalization, as promoted by people such as Vanguard’s John Bogle, Arnott’s newer indexing strategy weights them according to fundamental factors including revenues, or earnings, or a combination of such factors.

Schwab filed regulatory paperwork earlier this spring for a lineup of ETFs that will use fundamental indexes, with five of the proposed funds being replications of open-end mutual funds that Schwab already runs, IndexUniverse reported on March 15.

To be listed on the New York Stock Exchange’s Arca electronic trading platform, the funds are:

  • Schwab Fundamental U.S. All Company ETF (FNDB), to be based on the Russell Fundamental U.S. Index
  • Schwab Fundamental U.S. Large Company ETF (FNDX), to be based on the Russell Fundamental U.S. Large Company Index.
  • Schwab Fundamental U.S. Small Company ETF (FNDA), to be based on the Russell Fundamental U.S. Small Company Index
  • Schwab Fundamental International Large Company ETF (FNDF), to be based on the Russell Fundamental Developed ex-U.S. Large Company Index
  • Schwab Fundamental International Small Company ETF (FNDC), to be based on the Russell Fundamental Developed ex-U.S. Small Company Index
  • Schwab Fundamental Emerging Markets Large Company ETF (FNDE), to be based on the Russell Fundamental Emerging Markets Large Company Index

Read Tony Davidow on What’s Next for ETFs? at AdvisorOne.

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