The Russell Fundamental Index Series will comprise 24 new indexes designed to offer beta solutions to investors who desire access to non-capitalization-weighted products. It aims to provide a cost-efficient alternative to active management through an index-based approach. The new “strategy indexes” also can serve as a complement to cap-weighted passive investments.
“For investors seeking an active investment approach, these new indexes will offer much sought-after alternative beta exposures with the transparency, objectivity and broad diversification they have come to expect from the Russell Index family,” said Ron Bundy, managing director for Russell Indexes. Bundy added that the launch of these indexes does not change the firm’s belief that Russell’s market capitalization-weighted indexes remain best suited for benchmarking and are an excellent basis for investable products.
The index series will be based on the Research Affiliates Fundamental Index methodology of selecting and weighting constituents by fundamental measures of company size, as opposed to market capitalization. Using publicly available data, the three fundamental measures are a company’s adjusted sales, retained operating cash flow, and average dividends paid plus share buybacks. Currently, approximately $60 billion in assets are invested in non-price-weighted index strategies.
Initially, the new Fundamental Index family features indexes based on the universe of securities in the U.S. broad-market Russell 3000 Index and the Russell Global ex-U.S. Index. Together, both indexes capture 98% of the global investable market. They will be available for licensing to asset owners, investment managers and ETF and Mutual Fund sponsors.