Colonial First State index investment subsidiary, Realindex Investments, has tipped over the $1 billion funds under management mark in under a year and hired a portfolio manager.

The firm, a partnership between Colonial First State and California-based Research Affiliates LLC, launched the Research Affiliates Fundamental Index methodology to the Australian market.

In addition, the Realindex RAFI funds' strategy reflects a company's economic footprint, which uses sales and cash flow to weight a portfolio of companies instead of relying on market capitalisation.

Andrew Francis, chief executive at Realindex Investments, said institutional and retail clients are demanding an alternative to market capitalisation weighted indices, which has been part of the reason for the popularity of the firm's products.

Realindex Investments provides four products for wholesale investors and financial planners including Australian shares, Australian small companies, global shares and a hedged global shares strategy.

The wholesale version of the Australian share product returned almost 38 per cent between November 2008 and September this year, beating its benchmark by more than 2 per cent.

Francis said, while there are no immediate plans to add more products to the suite, the firm's index approach could be applied to other inefficient markets.

"The greater the inefficiency in the market the greater the performance drag caused by weighting according to price so we would look at other efficient markets such as emerging markets or global smaller companies," he said.

This comes as Realindex hired Peter Bull as portfolio manager and analyst. Bull joins the firm from Mellon Capital Management where he worked as an investment officer and quantitative analyst in Boston.

"We will continue to invest in people and systems to deliver value to institutional and retail clients and their advisers over the long-term," said Francis.