All of the alternative beta strategies are rebalanced annually at the beginning of the year. They are constructed by the largest N companies in the specified universes. N is defined as 1,000 for US, Developed Market, and Emerging Market.
Cap-Weighted
The Cap-Weighted portfolio is formed by weighting the largest N companies measured by market capitalization by their market capitalizations. A cap-weighted portfolio is mean-variance optimal if equity market is efficient. It has high liquidity, capacity, and low turnover rate.
Equally-Weighted
The Equally-Weighted portfolio is formed by assigning equal weight to the largest N companies measured by market capitalization. An equally-weighted portfolio is sensible if investors possess no information for estimating expected return and risk.
Fundamental-Weighted
The Fundamental-Weighted portfolio is formed by the methodology described in Arnott, Hsu, and Moore (2005). It measures company size by a composite of four accounting variables - book value of equity, total cash flow, total sales, and total dividend paid. It has relatively low tracking error to the cap-weighted benchmark without systemically over- (unde-) weighting over- (under-) valued stocks.
Reference:
Arnott, Robert D., Jason C. Hsu, and Philip Moore. 2005. "Fundamental Indexation." Financial Analysts Journal, vol. 61, no. 2 (March/April): 83 - 99.
Minimum Variance
The Minimum Variance portfolio is formed by the methodology described in Clarke, de Silva, and Thorley (2006). A minimum variance portfolio has lower realized volatility and it is mean-variance optimal if all stocks are assumed to have the same expected return.
Reference:
Copra, V.K., and W.T. Ziemba. 1993. "The Effect of Errors in Means, Variances and Covariances on Optimal Portfolio Choice." Journal of Portfolio Management, vol. 19, no. 2 (Winter): 6 - 11.
Clarke, Roger G., Harindra de Silva, and Steven Thorley. 2006. "Minimum-Variance Portfolios in the U.S. Equity Market." Journal of Portfolio Management, vol. 33, no. 1 (Fall): 10 - 24.
Haugen, Robert A., and Nardin L. Baker. 1991. "The Efficient Market Inefficiency of Capitalization Weighted Stock Portfolios." Journal of Portfolio Management, vol. 17, no. 3 (Spring): 35 - 40.