Designer Index Funds Come Into Fashion

How have these ETFs performed in real life? The answer is mixed. Among those with a five-year record (more than 80 funds), half beat the typical fund in their respective category and the other half lagged. The fund has tracked two different fundamentally oriented indexes. From inception through June 2011, PXSC tracked an Intellidex index that considers factors such as a stocks price relative to its 52-week high, cash flow, book value, and share buybacks, among others. Over that time, the fund lost an annualized 1.6%, lagging the Russell 2000 by an average of 2.9 percentage points per year. In mid-2011, the fund adopted a RAFI fundamental index that focuses on sales, dividends, cash flow and book value. But the change has not helped much: The fund has continued to lag; from the time the switch was made through November 29, it trailed the Russell 2000 by an average of 1.5 percentage points per year. The bottom line: Not all fundamental indexes shine. And although some are better than others, the higher returns may come with more risk. Many of these funds plunged more than the overall market in 2008, for instance, though they rebounded strongly in 2009. That combination suggests that some fundamental-index funds are more volatile than their vanilla rivals. But in 2009 it beat its benchmark by a staggering 15.2 percentage points, with a 41.7% return. Over the past five years, the FTSE RAFI US 1000 ETF has been 22% more volatile than the S&P 500 and funds that track it. Timeas in decadeswill tell whether enhanced index funds are better than funds weighted by market capitalization. But for now its safe to say that fundamental-index funds are just different. Its all salad, just a different dressing, says Rick Ferri, founder of Portfolio Solutions, a Troy, Mich., investment firm that uses index funds and ETFs. How do they work? Some funds home in on a single factor, such as revenues, earnings or dividends, and use it to drive stock selection and weighting in the index. In WisdomTrees profits-focused index funds, such as SmallCap Earnings ( EES ), a firms profits count for more than its market value in determining its rank in the fund. WisdomTrees dividend-focused funds, on the other hand, put the emphasis onyou guessed itdividends. Others focus on a combination of measures. RAFI indexes, created by Research Affiliates, weight firms by sales, dividends, cash flow and book value (assets minus liabilities). First Trust employs three value-oriented and three growth-oriented factors to create its AlphaDex indexes, including return on assets on the value side and sales growth on the growth side. Another key difference between these index funds and their traditional counterparts: regular rebalancing. Market-cap-weighted index funds, by contrast, are never rebalanced. All the extra work required is one reason fundamental-index funds cost more. They charge an average of 0.55% in annual feesmore than the typical charge of 0.48% for traditional index funds. Should I invest in a fundamental index? Dont replace all of your traditional index funds with fundamental-index products. Instead, use them to further diversify your portfolio. Some advisers who use funds suggest that clients split their index money 50-50 between traditional and fundamental-index funds (on top of any assets you may have in actively managed funds). Anthony Davidow, an asset allocation strategist at Schwab, prefers a 60%-40% mix of fundamental and traditional index funds. Which fundamental-index funds are worth investing in? We favor funds with easy-to-understand strategies, five-year track records that beat the appropriate benchmark on a risk-adjusted basis, and at least $150 million in assets.
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Blair Morgan - accidental interior designer

Blair Morgan faves: Bentley Photo: Blair Morgan During his stint as an office manager in a designer showroom, he was responsible for the business' computer and accounting systems, but, on a regular basis, he found himself pulled into discussions about client projects. He was later hired at a prestigious firm in Utah and, upon deciding to hang his shingle, returned to school to earn degrees in business management and interior design. In 1996, Morgan decamped to California. He lives in Menlo Park, where he operates a store, called Home, and interior design practice ( ). On the commercial side, Morgan is working on a country club in Pebble Beach. He also has a big residential project on the beach in Maui: two side-by-side homes for a mother and son. She wants an "old-fashioned beach house" while he wants "contemporary Hawaiian." And that suits the interior designer just fine: "I like to do all kinds of design - contemporary to very traditional and everything in-between," he says. In the past, Morgan's projects have taken him as far as England, where he did color consultation for a castle. Since opening Home in late 2012 - which he describes as one of his proudest accomplishments - he has kept especially busy with local jobs. "The most consistent compliment my clients give me at the end of the projects is that I've created a space that is warm, welcoming and approaching," says Morgan. "They feel like they can use and want to use every room of their home. I'd much rather be known for that than for a certain style. " The Morgan cheat sheet Shop locally: "The Internet is great and, yes, I use it, but without supporting your local artists, craftsmen or stores, there will be no one left to inspire, enrich or beautify your community. In Menlo Park, I love the Picket Fence for tableware, the Oriental Carpet for rugs and Rococo & Taupe for kitchen cabinets. Oh, and Sugar Shack for all things candy!" ( , , , ) Special souvenirs: "When you travel, buy something special from each place - even if it is just one really good thing that will help you remember where you've been. No matter what you buy on a trip, there is always a place for it in your home, and it will always work with your existing decor because it is something you love. I have a Buddha that I bought in Thailand after the tsunami in 2004, and it reminds me of living every day like it was your last." Artful execution: "There is nothing that can bring more emotion into a room than artwork. Real art. Original art. It is so incredibly personal and means different things to each person that enters the home. It inspires. It challenges. And it doesn't have to be expensive. I buy art that moves me, makes me think or makes me laugh. You should see the stuff I have hanging on my walls! I always enjoy going to galleries - especially City Art Gallery in light blue prom dresses San Francisco - but the real finds are often at art festivals or street fairs." ( ) Wonder wall: "Elitis is not your grandmother's wallpaper with ducks wearing hats and bows. This stuff is amazing. We are doing a kid's room in a modern house in Hawaii in a covering made out of neoprene - the material from which wetsuits are made. Talk about changing a room and adding texture. This is the way to do it." ( ) Well lit: " Ron Carter hand pours each one of his candles in his studio in Carpinteria (Santa Barbara County). I love the subtle imperfections that only handcrafted items can offer. Each one is a work of art. My favorite is the Dark Canyon scent." ( ) A few favorites Christian Lacroix pillows: "I saw these in Vancouver and had to have them for my store. They are so twisted and outside the box, yet so beautiful and unique. You can get yours in my shop." ( ) Bentley: "He was my golden retriever and the love of my life. He passed away last Christmas at the age of 3, and I miss him." Anywhere an airplane goes: "You may be surprised to learn that exploring the globe is my main passion, not design. I decorate to support my travel habit! One of my favorite places is Dubrovnik, Croatia." Anh-Minh Le is a Portola Valley freelance writer. E-mail:
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Kenya Hara: the future of design

I only have two types of jobs, he says. The first are jobs where Im commissioned to make work and the second are jobs where I propose an idea to society, where I suggest another way of looking at something. These proposals have sometimes seemed absurd, but they have led him to create some of his most interesting exhibitions and writings: What do macaroni and architecture have in common? What would the world look like built at a nonhuman scale? What could common daily products become if they were redesigned? How can we design for all five senses? What makes Hara really valuable as a Japanese designer is his ability to articulate a clear philosophy about Japanese design that is sensitive to the present as much as it is to the past. Looking ahead, if there is one man in the country who can project what the future of Japanese design could (and should) involve, its Kenya Hara. To talk about the future of Japanese design we need to look back to the postwar period, when industrial design in Japan went hand-in-hand with local Japanese manufacturing. For almost 50 years after World War II, the number of people working in Japanese factories making such things as fridges, televisions, air conditioners and domestic industrial products increased. The number of manufacturing workers in such jobs peaked at 16.03 million people in October 1992. According to a report released by the Internal Affairs Ministry in February 2013, the number of people working in manufacturing at the end of 2012 was just below 10 million, the lowest number in more than 50 years. Firms that churn out low-cost, mass-produced goods have moved assembly lines offshore, and Hara thinks the manufacturing of other goods is likely to follow. This industry is now reaching its end, he says. We are going through a change, from having to create products to having to create value. The type of value he is talking about is the value that can be found in a piece of Swiss Emmental cheese. No, Hara is not joking. When you eat a piece of Emmental cheese, he explains, you consume more than just pressed curds of milk from Switzerland, you also consume culture (Both kinds Eds.). Its about the value thats created around the product, says Hara, speaking broadly about Swiss cheese, French wine or German bread. Hara believes that Japanese designers need to consider how to create or design value, to think of culture as a resource. When we typically think of resources we think of materials and minerals, Hara says, but a resource can also be aesthetic, or even cultural. He believes that Asian countries have a key cultural resource that cannot be found anywhere else in the world. Lifestyle has value in Asia, he says. The Swiss have their cheese, the French their wine, but Haras future Japan will be based on the export of a way of life. Hara is not the first person to think about Japans fading economic and cultural power, but his ideas are wrestling with the problem at a far more structural level than the Ministry of Economy, Trade and Industrys Cool Japan solution. This government initiative has a tough job trying to get beyond easy stereotypes about Japanese pop culture abroad. In short, it has yet to live up to its promise. A 2012 report singled out media and content that is, most likely anime and manga as the most important resource to spread abroad in the years leading up to 2020. But Haras eyes are clearly fixed on other resources. What are Japans resources? he asks, Im particularly thinking about traditional aesthetics. Ive identified four keywords related to this: sensai (delicateness), chimitsu (meticulousness), teinei (thoroughness or attention to detail) and kanketsu (simplicity). Hara sees the migration of domestic manufacturing to other Asian countries as one factor influencing structural change in Japanese design. I feel the designers role has changed in recent years from one of creating beautiful forms or clear identification for brands to one where the designer himself visualizes the possibilities of an industry. And just to ensure he gets his point across, he restates his position in English. Visualizing and awakening the hidden possibility of an industry, he says. It seems overworked Japanese designers may not be getting a break anytime soon. By now, the sun has set outside and the streets of Ginza are glistening with streetlights and colored lightboxes. Haras personal assistant, Yoshino Nihonyanagi, enters the room and informs us that we will need to finish the photo shoot before the library closes. We dont have much time. Whats more, she adds for good measure, Hara will need to attend an awards ceremony soon. While his portrait is being taken, Nihonyanagi shares her thoughts about working with the countrys preeminent designer for the past two years. Ive already filled every day of his schedule until 2015, she says. Ive turned down at least 15 to 20 interviews this month just because I couldnt find the time for them. We were only able to fit you in because of a cancellation. His days are spent with students at the university he teaches at, or with interviewers or clients. Nihonyanagi notes that Hara only really gets time to reflect on his work and write his books late at night and when he is 35,000 feet in the air, traveling overseas for a job. Part of Nihonyanagis job is to keep Hara on schedule as he juggles his myriad projects. He needs a schedule, she says, but I know he doesnt want to follow a schedule. And right now, no matter how many times I tell him that he needs to get ready for the awards ceremony She is cut off by Hara, who has returned from the photo shoot. Its almost as if he heard her. Ah, mosukoshi. . . . Were going to talk a little more, he says. Hara is part of a postwar generation who grew up in a country desperate to Westernize and modernize itself (some of the time, those terms meant the same thing). Hara believes the future of Japanese design includes a reversal of part of this process. The basic concept is to clean up the Japanese archipelago again, he says. By clean up he means getting rid of the industrial factories that line the coast of Japan from Ibaraki to Fukuoka in the worlds largest megalopolis, the Taiheiyo Belt. Postwar Japan tried to focus on using the Japanese terrain as a factory to create industrial value, Hara says. But the Japanese terrain is naturally very rich. Its our challenge now to recreate the Japanese landscape in a way that allows people to find value in those places. In 2010, Hara worked with curator Fram Kitagawa on a landscape-recreation project called the Setouchi Triennale. It was essentially an art festival spread out over islands with declining post-manufacturing communities in the Seto Inland Sea. The project proved so successful that the organizers decided to expand it to 12 islands for the 2013 Setouchi Triennale edition. But this process of cleaning up doesnt have to be about art, Hara says. What Benesse (the company who supports the festival) is trying to do there is to compose an art zone that will induce and provide value for a long time. Hara views design in similar ways to designer, teacher and design philosopher Victor Papanek, who wrote Design For The Real World: Human Ecology and Social Change (1971). While Papanek generally chooses to focus on the importance of social and ecological issues in design, Hara prefers to reflect on the philosophical ideas in design, and stays away from Papaneks polemical tone. Im not interested in creating messages against something, writes Hara in Designing Design (2007). Design should function my website as part of a planning process. The themes in our talk seem to be weaving themselves towards an elephant in the room: the Fukushima nuclear power plant. Does one of the worlds largest nuclear crises make him reconsider that quote, and should social and political activism be a part of the future of design in Japan? This is a difficult question to answer, he says.
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