- Canada market cap grows by 11% in past year, remains fourth largest country by weight within the Russell Global Index behind the U.S., United Kingdom and Japan
- Canadian market growth style orientation increases by nearly 10%, stands at 57% growth / 43% value orientation at this year's reconstitution compared to 49% growth / 51% value in 2013
- Energy (+2.2) and Financial Services (+0.84) sectors see biggest percentage point increase in Canada since 2013 reconstitution, while Materials & Processing (-3.4) sector had biggest percentage point decrease
- Russell Indexes to reclassify Egypt as frontier market; change index country assignment for Tyco, Liberty & Delphi; business development companies (BDCs) no longer eligible
TORONTO, June 25, 2014 /CNW/ - Russell Investments has posted its official lists of companies set to join or leave the Russell Global Index, Russell 3000® Index and Russell Microcap® Index when the annual reconstitution for its U.S. equity indexes concludes on June 27. The lists of projected additions and deletions for the Russell Indexes are available at the Russell reconstitution website and include 38 additions to Canada.
Each June, Russell realigns its family of global equity indexes to reflect market changes in the past year. This year's rebalancing will impact approximately US $5.2 trillion in assets benchmarked to and nearly US $800 billion in assets invested in institutional and retail investment products based on the Russell Indexes.
U.S. leads global equity markets to new all-time highs; leadership shifts toward large-cap value in the U.S. as peripheral Europe rebounds and Canadian equity market expands
"Changes at this year's Russell Indexes reconstitution for Canada reflect a market led by energy and banks on the heels of an improving U.S. economy," said Shailesh Kshatriya, associate director, client investment strategies at Russell Investments Canada Limited. "Going forward, we believe these two sectors will play a pivotal role in the outcome of the domestic benchmark as well as the Canadian economy.
The Canadian equity market increased 16% for this year's reconstitution period, from May 31, 2013 through May 30, 2014, and now stands at $2.1 trillon CAD in total market capitalization. At this year's reconstitution, 38 Canadian companies join the Russell Global Index, an increase from 34 last year, placing Canada eight among countries adding new constituents. Of the 38 new Canadian companies joining, 11 are Energy companies and five are from the Financial Services sector. These two sectors had the biggest increase in weighting within Canada since last year's reconstitution, gaining 2.2 and 0.84 percentage points, respectively. The Materials & Processing sector had the largest loss since last year, decreasing its weighting by (-3.4) percentage points. A notable departure from the Top Ten includes Potash Corp. of Saskatchewan, whose stock struggled after the breakup of the Belarusian Potash Company cartel, while high flying Valeant Pharmaceuticals was a new entrant to the Canada Top Ten.
Total market cap for the Russell 3000® Index, reflecting about 98% of the investable U.S. equity universe, increased nearly 18% to US $23.2 trillion for this year's reconstitution period, from May 31, 2013 through May 30, 2014. The U.S. small-cap Russell 2000® Index increased over 17% to US $2.0 trillion. And the breakpoint between U.S. small- and large-cap stocks hit a new record of US $3.1 billion, up 19% from US $2.6 billion in 2013.
In the U.S. market, the Russell 1000®, 2000® and 3000® Indexes all reached new highs in the past year. Large caps outperformed small caps during the one year period ending May 30, 2014, with a 20.9% return for the Russell 1000® Index relative to a 16.8% return for the Russell 2000® Index. Year-to-date, performance leadership in the U.S. has shifted to large-cap value, with the Russell 1000® Index outperforming the Russell 2000® Index and the Russell 1000® Value Index outperforming the Russell 1000® Growth Index.
Total market cap for the Russell Global Index, reflecting about 98% of the investable global equity universe, increased 13% to US $60.6 trillion for this year's reconstitution period, from May 31, 2013 through May 30, 2014. The global index (which includes the U.S. market) experienced an 18.1% increase for the 12-month period ending May 30, 2014, while the Russell Global ex-U.S. Index returned 15.9% for the same period. Top performing developed market countries over the last year include Spain (46.4%), Denmark (44.3%), Italy (39.6%) and Finland (38.6%).
With a one year return of 5.7%, the Russell Emerging Markets Index lagged compared to developed markets. Top performing emerging market countries included the United Arab Emirates (75.9%), Egypt (50.3%) and Greece (27.6%). While Egypt exhibited strong performance over the last 12 months, persistent economic and market risks associated with Egypt resulted in Russell's reclassification from emerging to frontier market status as of reconstitution 2014.
The Russell Frontier Index returned 16% in the 12 months ended May 30, 2014, with Qatar (54.5%) the top-performing country. Qatar's strong equity market growth caused its index weighting to be capped at the maximum 15%, according to Russell Frontier Index methodology.
Of the 846 new additions to the Russell Global Index at reconstitution (41 of which are initial public offerings, or IPOs), the U.S. gained the largest number of new companies through the reconstitution process (148) followed by Taiwan (68), China (67) Japan (59) and the United Kingdom (56). The U.S. led all Russell Global Index country constituents in IPO additions at reconstitution with 27, followed by the UK (7), and China (5).
Thirty year anniversary for market indexes at Russell Investments
"With our annual index reconstitution, the global equity markets receive their annual report card," said Ron Bundy, CEO of Russell Indexes. "Index reconstitution is a critical time for our global indexes and for our clients. Because this process includes our entire index family and impacts investors around the world, it is one of the most closely watched market events of the year. This year's reconstitution is even more significant as it has been 30 years since Russell first introduced market indexes."
Since the Russell 1000®, 2000® and 3000® Indexes were introduced in 1984, the Russell family of global market indexes has grown to reflect three decades of unprecedented growth in the global equity markets:
- An original member of the Russell 3000, Apple Inc. had a market cap of $1.6 billion in June 1984. At May 30, 2014 (ranking day for 2014 reconstitution) it is $545.3 billion and retains the top spot.
- As of the beginning of 1984, total U.S. market cap was $1.8 trillion, as measured by the Russell 3000. At this year's reconstitution, this number is $23.2 trillion.
- In 1984, the breakpoint between the Russell 2000 and the Russell 1000 was $255 million. At this year's reconstitution, it is $3.1 billion.
Index Methodology Determines Country & Company Re-classifications, BDC Disqualification
As previously announced on March 3, 2014, Russell's index country classification process has determined that Egypt, formerly classified as an emerging market, will enter the Russell Frontier Index effective at reconstitution. In addition, Russell's rule for determining country assignment for index constituents, which takes into consideration three home country indicators (HCIs) 1) country of incorporation, 2) country of headquarters 3) location of most liquid exchange, as well as primary location of assets and/or revenue when necessary, has determined that Tyco, Inc., will be reclassified from Switzerland to the U.S. and rejoin the Russell 1000® Index. Russell's country assignment rule has also determined that Liberty Global and Delphi Automotive, currently in the Russell 1000®, will be reassigned to the Russell Global ex-U.S. Index.
Russell also concluded that business development companies (BDCs) are ineligible for Russell Index membership as a result of issues related to reporting of acquired fund fees per SEC regulation. At the June 2014 Russell Index reconstitution, BDCs will be removed from the Russell Indexes.
The preliminary lists of additions and deletions are the first public step in Russell's annual reconstitution. Any updates are posted June 20 and 27. Final membership lists, which include breakouts for the Russell 1000® Index, the Russell 2000® Index and the Russell Midcap® Index, will be posted on Monday, June 30.
To complete this year's reconstitution, Russell uses primary exchange closing prices from The NASDAQ Stock Market (NASDAQ) and NYSE. About half of the stocks in the Russell 3000® broad market index are listed on either exchange. NASDAQ-listed stocks utilize the NASDAQ's Closing Cross auction, official platform for the Russell rebalance, while NYSE-listed stocks utilize the NYSE's floor-based high-tech, high-touch auction process to execute shares for each stock at a single price on June 27. Russell is commemorating its 30th index anniversary and concluding its annual index reconstitution this week with bell ceremonies at NYSE (opening Tuesday, June 24) and NASDAQ ("Closing Bell" during the NASDAQ Closing Cross on Friday, June 27).
For more information, go to the Russell reconstitution website.
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 stands 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 $286.7 billion CAD in assets under management (as of 3/31/2014) 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 US$2.4 trillion in assets under advisement (as of 6/30/2013). 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 US$1.6 trillion in 2013 through its implementation services business. Russell also calculates approximately 700,000 benchmarks daily covering 98% of the investable market globally, including more than 80 countries and more than 10,000 securities. Approximately US$5.2 trillion in assets are benchmarked (as of 12/31/2013) to the Russell Indexes, which have provided investors with 30 years of smarter beta.
With Canadian headquarters in Toronto, Russell operates globally, including through its global headquarters in Seattle, Washington and offices in New York, London, Paris, Amsterdam, Sydney, Melbourne, Auckland, Singapore, Seoul, Tokyo, Beijing, Toronto, Chicago, San Diego, Milwaukee, Edinburgh and Vancouver. For more information about how Russell helps to improve financial security for people, visit www.russell.com or follow @Russell_News.
Russell Investments is a Washington, USA Corporation, which operates through subsidiaries worldwide 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 the Russell Indexes.
Russell Investments Canada Limited is a wholly owned subsidiary of Frank Russell Company and was established in 1985. Russell Investments Canada Limited and its affiliates, including Frank Russell Company, are collectively known as "Russell Investments".
Indexes are unmanaged and cannot be invested in directly. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.
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SOURCE: Russell Investments Canada Limited
For further information: Beja Rodeck, 905-885-5945 or firstname.lastname@example.org; Tim Benedict, 212-702-7823 or TBenedict@russell.com