It's not easy building a better index, but Rob Arnott believes that he's found a way.

Arnott, chairman of investment management firm Research Affiliates, is the man behind the concept of "fundamental indexing," an alternative index strategy that uses revenue, book value, cash flow and dividends, as opposed to market cap to weight components.

According to Arnott, his indexing approach has beaten the S&P 500 by 200 basis points on a historic basis. PowerShares launched its first exchange-traded fund based on this "fundamental" strategy, the PowerShares FTSE RAFI US 1000 Portfolio ( PRF), in December. Now the firm has 10 additional ETFs in registration based on Arnott's indices.

Arnott stopped by TheStreet.com to chat with Gregg Greenberg about fundamental indexing, as well as the rash of new ETFs hitting Wall Street.

To watch Greenberg's video interview with Arnott, click here.

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