'Godfather' of Fundamental Indexing Faces Challenge

A year ago this week, when WisdomTree Investments (WSDT Quote) launched its first 20 exchange-traded funds, it threw down the gauntlet in the rarified world of indexing.

At the time, it was the largest number of ETFs tracking indices based on fundamental criteria -- primarily dividends -- rather than stock prices.

It was also a challenge to Rob Arnott, the godfather of fundamental indexing. Arnott's investment firm, Research Affiliates, had licensed the first ETF based on a fundamental index a year earlier and filed a patent application for all indices based on fundamentals.

But WisdomTree didn't seek Arnott's blessing for its new products. In essence, the firm was saying that fundamentally weighted indexing isn't the property of Research Affiliates but of the entire world. ...