FTSE Russell announces constituent changes to US indices

Jun 20th, 2017 | By | Category: Equities

Dive deeper into ESG & Impact investing at our upcoming breakfast briefing on Wednesday 28th March 2018 at The South Place Hotel, London, with presentations from Equileap, FTSE Russell, MSCI and UBS - REGISTER NOW

FTSE Russell has posted its official preliminary lists of companies set to enter or leave its Russell US Indices ahead of their annual rebalance after markets close on 23 June 2017. Approximately $8.5 trillion in assets are benchmarked to Russell US indices, including several billion in directly linked ETFs, underscoring the importance of reconstitution to the market.

Annual Russell US indices reconstitution coming on 23 June

The US large-cap Russell 1000 index is up nearly 20% since the last reconstitution.

The largest ETF that tracks the Russell 1000 Index is the iShares Russell 1000 ETF (NYSE Arca: IWB) which has $18.5 billion in assets under management. European investors looking for exposure to Russell US indices could try the SPDR Russell 3000 US Total Market UCITS ETF (LON: R3TM) or the Xtrackers Russell 2000 UCITS ETF (LON: XRSU).

Each June, the entire family of Russell US indices are realigned and recalibrated to reflect market changes in the past year.

Commenting on the year since the previous reconstitution in June 2016, Mat Lystra, senior index research analyst at FTSE Russell, said: “It was a tale of two markets this year in US equities as reflected by the Russell US indices. The market exhibited strong growth in the past year, yet the lion’s share of the growth came after the US presidential election in November.”

The broad US equity market, as reflected by the Russell 3000 Index, grew in size during the period since the 2016 reconstitution, with total market capitalisation increasing nearly 13% to $27.2 trillion at this year’s rank date (12 May 2017). In total, 196 companies will be added to the Russell 3000 this year; 115 are moving up from the Russell Microcap Index, 54 are new additions to the index and 27 are IPOs. The sectors attracting the highest number of new entries to the Russell US indices this year are financial services (53), health care (37) and technology (30).

The breakpoint between the large-cap Russell 1000 Index and the small-cap Russell 2000 Index is expected to reach $3.4 billion this year. This represents a 17% increase over 2016 and is nearly equal to the breakpoint from two years ago.

Between 27 June 2016, the first day of the newly reconstituted Russell US indices, and 12 May 2017 rank day for this year’s reconstitution, the Russell 1000 Index and Russell 2000 Index recorded returns of 19.6% and 24.2% respectively, with 13.5% and 16.8% coming after the US presidential election on 8 November.

The technology sector has helped drive large and small cap stock performance over the past year and was the best performing sector in both the Russell 1000 and Russell 2000 indices, up 36% and 38% respectively since the last reconstitution.

Apple retains its position as the largest Russell US indices constituent by market capitalisation, with its size expanding 48.1% since 2016. Apple’s total market capitalisation stood at nearly $814 billion on 12 May 2017, continuing its now five-year run as the largest US stock. Alphabet and Microsoft retain spots number two and three while Amazon and Facebook are expected to move into the top five for the first time.

ExxonMobil was the only stock among the ten largest US companies to shrink since last year’s reconstitution, with its total market cap down by 6.3% in a year in which the energy sector in the Russell 1000 Index lost 1.6% of its value. The energy sector was also the only sector to record a negative return in the Russell 2000 Index, with a fall of 1.3%.

The preliminary lists of additions and deletions are the first public step in the annual reconstitution process for the Russell US indices. The closely watched final index membership lists, with breakouts for the Russell 1000 Index, the Russell 2000 Index and the Russell Midcap Index, will be posted on 26 June when the new indices begin operating.

Tags: , , , , , , ,

Leave a Comment