New approach meant to improve results versus conventional index investing. Wilmington Trust has added two new mutual funds, the Wilmington Fundamentally Weighted Large Company Fund and the Wilmington Fundamentally Weighted Small Company Fund, to its line-up of domestic equity pools.

"Fundamentally weighted portfolios represent an enhancement of market cap-weighted index investing," says Rex MaceyWilmington's director of equity management. "Conventional indexing has strengths, including low operating costs and the predictability of achieving substantially similar performance to an unmanaged index. Maintaining proper portfolio balance, however, is not one of them. Fundamentally weighted portfolios can help solve that problem."

More than market cap

Wilmington will use "fundamental" company metrics -- net income, dividends and free cash flow -- to pick securities, not the typical market-capitalization measure used to select stocks to track in conventional indexing. This approach keeps investors from being "over-exposed to over-valued securities and under-exposed to under-valued securities," according to Wilmington.

By one estimate, there is approximately $3 trillion invested worldwide in portfolios that track indexes. Another estimate has nearly 12% of all U.S. mutual fund assets held in indexed portfolios.

"We believe many investors who are comfortable with conventional indexed portfolios will find fundamentally weighted portfolios to be a sensible alternative," says Macey. "This approach has the benefits of conventional index investing -- broad diversification, relatively low portfolio turnover and cost, tax sensitivity -- without the drawback of chasing overpriced stocks."

About two months ago Wilmington hired Darryl Grayson from Gabelli Funds to spearhead distribution of its proprietary investment products to fee-based investment platforms.

In addition to its headquarters in Wilmington, Del., Wilmington Trust and its affiliates have offices in California, Florida, Georgia, Maryland, Nevada, New York, Pennsylvania, South Carolina and Vermont. Overseas it has offices in London, Dublin, the Cayman Islands and the Channel Islands. -FWR

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