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.
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.
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.
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.
Arnott, Robert D., Jason C. Hsu, and Philip Moore. 2005. "Fundamental Indexation." Financial Analysts Journal, vol. 61, no. 2 (March/April): 83 - 99.
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.
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.