Patent on Investment Methodololgy

News that Research Affiliates has been granted a US patent for an indexing methodology that selects and weights securities using fundamental measures of company size, such as dividends and sales should set alarm bells ringing in investor circles the world over. While the ruling only affects the United States there is the danger that US law gains ex-territorial reach or gets copied by other legislatures.Granting a patent on an investment methodology is akin to granting a patent to the first person that has opened a self-service supermarket. It is nonsense and makes a mockery of the true purpose of patent protection for technological and medical innovations. Fees charged by Research Affiliates are a extra drag on investment returns achieved by investor's funds. We hope that fund providers have enough intelligence to do their own index construction. This work requires only minimal skill and can be performed on any standard PC.