Russell Posts Preliminary Lists of Global / U.S. Index Additions as Part of
Annual Reconstitution Process
*U.S. index changes reflect new all-time highs for U.S. stocks since last
*Globally, European and frontier markets strong, emerging markets weighted
down by BRICs.
*Apple remains largest U.S. company, losing ground to ExxonMobil.
Petrochina largest outside U.S.
SEATTLE -- June 14, 2013
Russell Investments has posted its official lists of companies set to join or
leave the U.S. broad-market Russell 3000^® Index and Russell Microcap^® Index
when its industry-leading U.S. equity indexes fully reconstitute on June 28.
These lists of U.S. companies—and lists of additions and deletions for the
Russell Global Index—are now available at the Russell reconstitution website.
The Russell 3000 Index, which reflects about 98% of the investable U.S. equity
universe, returned 27.9% for this year’s reconstitution period, from May 31,
2012 through May 31, 2013. Performance was equally strong across large- and
small-cap stocks for this period, with the U.S. large-cap Russell 1000 Index
returning 27.6% and the U.S. small-cap Russell 2000^® Index returning 31.1%.
The Russell 1000, Russell 2000 and Russell 3000 Indexes all broke through new
all-time historical highs earlier this year.
Key measures of market size are significantly higher across the Russell Global
Indexes this year, reflecting market performance. In the U.S., the combined
capitalization of stocks in the Russell 3000 is expected to increase nearly
25% from $15.8 trillion at May 31, 2012 to $19.7 trillion at May 31, 2013.
Similarly, market value weighted average market capitalization is expected to
increase from $87.4 billion to $90.4 billion.
Breakpoints between the Russell U.S. indexes are expected to increase
significantly across the board since last year’s reconstitution, with a 30%
increase in the cutoff between the U.S. large-cap Russell 1000 Index and U.S.
small-cap Russell 2000 Index. The new $2.6 billion expected breakpoint between
these two indexes will exceed the previous high of $2.5 billion established in
2007. In addition, the market capitalization threshold for new companies
entering the Russell 2000 Index is expected to increase by 28% to $128.9
“Russell's index reconstitution reflects the broad-based global equity market
rally over the past year. The granularity afforded by these indexes also show
that there have been notable differences across markets and regions ─ with
pockets of strength and softness having emerged in recent months,” said Steve
Wood, chief market strategist for North America at Russell Investments. "The
annual global market ‘snapshot’ at Russell Indexes reconstitution provides an
excellent tool for market analysis and exposure to key drivers across regions,
capitalizations, sectors and styles. This makes the indexes a critical
resource for globally diversified multi-asset investors.”
Financial Services and Technology are expected to remain the top two sectors
by weight within the Russell 3000 Index at reconstitution in a year with
minimal shifts in sector leadership. The U.S. Financial Services and
Healthcare sectors reflected the strongest performance over the year,
returning 39.7% and 36.4%, respectively.
Technology leader Apple Inc. ($422.1 billion) is expected to remain the
largest company in the Russell 3000 Index in terms of market capitalization
despite a 22% decrease in size. Apple overtook ExxonMobil at last year’s
reconstitution to become the largest company in the Russell 3000 Index.
ExxonMobil ($402.3 billion) has re-gained ground this year, growing 9.4% to
narrow the gap between the two largest U.S. companies. Apple has shifted from
a 100% growth orientation at 2012 reconstitution to a 76% growth / 24% value
orientation. Microsoft ($293.1 billion), Google, Inc. ($287.9 billion) and
Berkshire Hathaway ($281.2 billion) are expected to round out the five largest
U.S. companies, with Google up more than 50% since May 31, 2012.
One notable change in the Russell 3000 Index this year is the weight
represented by Facebook. As the largest IPO addition to the Index at last
year’s reconstitution following its May 2012 IPO, it is expected to increase
its weight within the Index given the release of previously “locked-up” IPO
shares, increasing available market cap from $10.2 billion to $41.5 billion at
this year’s reconstitution.
Equity markets outside the U.S. also notched strong gains in the past year, as
reflected by the Russell Global ex-U.S. Index, which includes approximately
7,000 securities in 46 countries covering 98% of the investable equity market
outside the U.S. Within the Index, combined market capitalization will
increase by 18.3% from $28.4 trillion as of May 31, 2012 to $33.6 trillion as
of May 31, 2013 and market value weighted average market capitalization will
increase from $38.8 billion in 2012 to $46.8 billion in 2013. The largest
company in the Russell Global ex-U.S. Index remains unchanged from 2012, with
Petrochina Co. Ltd. ranking number one in size. Like Apple in the U.S.,
Petrochina also experienced a decrease in total market cap between
reconstitution periods, with a total market cap of $249.5 billion as of May
31, 2013, down 7% from $267 billion in May 2012.
The Russell Global ex-U.S. Index returned 26.7% for this year’s reconstitution
period, from May 31, 2012 through May 31, 2013. Notably, European markets
helped drive performance for this time period, with the Russell Eurozone Index
returning 39.1%. Within Europe, strong performers included Greece (73.8%),
Spain (50.1%), Portugal (46.5%) and Italy (44.0%).
And the Russell Frontier Index was a strong contributor to non-U.S. market
performance in the past year, returning 26.9%, with Nigeria a standout with an
86.2% increase. The Russell Emerging Markets Index, while still positive,
reflected a relatively smaller return of 16.5% since last year’s
reconstitution. Specifically, the Russell Emerging Markets Index was weighted
down by the BRIC nations (Brazil, Russia, India & China) which represent a
sizeable portion of the Index and have all underperformed since last year’s
Greece will officially become an emerging markets country within the Russell
Global Indexes at the conclusion of reconstitution. Russell Indexes first
announced on March 1 that Greece will be reclassified from a Developed to an
Emerging market country at this year’s reconstitution, having failed to meet
Russell Indexes’ Market Risk Review requirements for a Developed market
country for three straight years. And, while no other country classifications
are imminent for 2013, Egypt is in its second year of failing to meet the
requirements to be classified as an emerging market country in Russell Indexes
three-year Market Risk Review process.
“A regularly scheduled, transparent reconstitution process is a key feature of
truly representative and objective benchmarks," said Rolf Agather, global head
of index research and innovation at Russell. "Russell's unique process helps
prevent capitalization drift and style bias and ensures proper country
classification and market risk orientation. And it is adjusted and improved
upon each year to make the indexes an accurate representation of current
market realities and investor behavior. Russell Indexes reconstitution helps
multi-asset investors better measure performance, identify opportunities and
invest for the long term."
Since introducing its first equity index nearly 30 years ago, Russell has
drawn on its unique insight into global capital markets and multi-asset
portfolio construction and implementation to design benchmarks offering
exposure to the true performance of different segments and asset classes of
the market. When measuring or investing in markets, global multi-asset
investors rely on Russell Indexes to provide accurate and objective market
representation. $4.1 trillion in global assets are benchmarked to and more
than $600 billion in passively managed assets are based on Russell’s global
index family. The Russell Indexes reconstitution methodology has remained an
industry standard since Russell introduced its first index in 1984 and Russell
continues to improve on its reconstitution process each year.
The preliminary lists of additions and deletions are the first public step in
Russell's annual reconstitution process. Any updates to the lists will be
posted June 21 and 28. The closely watched final membership lists, which will
include breakouts for the Russell 1000 Index, the Russell 2000 Index and the
Russell Midcap® Index, will be posted June 28 after the close of the U.S.
To complete this year's U.S. reconstitution, Russell uses primary exchange
closing prices from NYSE and NASDAQ. About half of the stocks in the Russell
3000 broad market index are listed on either exchange. NYSE-listed stocks
utilize NYSE’s auction mechanism while NASDAQ-listed stocks utilize NASDAQ’s
"closing cross" mechanism to execute shares for each stock at a single price
on June 28. This will mark the 10^th anniversary of the Closing Cross.
About Russell Investments
Russell Investments (Russell) is a global asset manager and one of only a few
firms that offers actively managed multi-asset portfolios and services that
include advice, investments and implementation. Russell sands with
institutional investors, financial advisors and individuals working with their
advisors ─ using the firm’s core capabilities that extend across capital
market insights, manager research, portfolio construction, portfolio
implementation and indexes to help each achieve their desired outcomes.
Russell has more than $173 billion in assets under management (as of
3/31/2013) and works with over 2,500 institutional clients, independent
distribution partners and individual investors globally. As a consultant to
some of the largest pools of capital in the world, Russell has $2.6 trillion
in assets under advisement (as of 12/31/2012). It has four decades of
experience researching and selecting investment managers and meets annually
with more than 2,200 managers around the world. Russell traded more than $1.4
trillion in 2012 through its implementation services business. Russell also
calculates approximately 700,000 benchmarks daily covering 98% of the
investable market globally, which includes more than 80 countries and more
than 10,000 securities. Approximately $4.1 trillion in assets (as of 12/31/12)
are benchmarked to the Russell Indexes.
Headquartered in Seattle, Washington, Russell operates globally, including
through its offices in Seattle, New York, London, Paris, Amsterdam, Sydney,
Melbourne, Auckland, Singapore, Seoul, Tokyo, Toronto, Chicago, San Diego,
Milwaukee and Edinburgh. For more information about how Russell helps to
improve financial security for people, visit www.russell.com or follow us
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide, including Russell Investments, and is a
subsidiary of The Northwestern Mutual Life Insurance Company. Russell
Investments is the owner of the trademarks, service marks and copyrights
related to its respective indexes. Russell’s indexes are unmanaged and cannot
be invested in directly.
Nothing contained in this material is intended to constitute legal, tax,
securities, or investment advice, nor an opinion regarding the appropriateness
of any investment, nor a solicitation of any type. The general information
contained in this publication should not be acted upon without obtaining
specific legal, tax, and investment advice from a licensed professional.
Tim Benedict, 212-702-7823
Alexandra Davis, 206-505-4543
The Neibart Group
Natalia Krepak, 203-858-2548
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