Russell Investments added 197 companies to its broad-market Russell 3000 Index as part of its annual reconstitution this year, of which it said 39 were initial public offerings, including Facebook’s. Overall market value of the index meanwhile fell more than 5 percent.
The Russell 3000, which reflects about 98 percent of the U.S. equities universe, had a total market value of $15.8 trillion as of May 31, down 5.4 percent from the year-earlier figure of $16.7 trillion. The Russell 3000 comprises the small-cap stocks of the Russell 2000 and the large-cap stocks of the Russell 1000. Russell added 186 firms in 2011’s reconstitution.
“Russell's index reconstitution reflects the market decline over the past year. That said, returns have been far from uniform," Steve Wood, chief market strategist for North America at Russell Investments, said today in a press release.
"Even as the flare-up in the eurozone crisis, China’s slowdown and relatively soft U.S. economic data have weighed on investor sentiment in recent weeks, the global markets showed resilience when viewed over the course of a year,” he said.
The changes to U.S. companies in Russell indexes, as well as additions and deletions to the Russell Global Index, are preliminary, and will be finalized on June 25, the Seattle-based company said in the release.
All the reconstitution changes are viewable on the company’s website.
The process of reconstituting benchmarks takes place annually and revisits the inclusion of particular companies in various indexes through rules such as market capitalization rankings, the company said in May when it announced the timing of this year’s changes.
“A routinely scheduled reconstitution is a key feature of truly representative and objective benchmarks," Rolf Agather, global head of index research and innovation at Russell, said in the press release.
The process categorizes stocks to properly represent small-cap, midcap, large-cap and microcap stocks, and also serves as a clear measure of the shifts in relative valuations of value and growth stocks over the past year.
Additional Recon Details
Russell also noted in its press release that the median market capitalization of the Russell 3000 will decrease by 12.5 percent to $910 million from $1.04 billion in 2011.
It said financial services led the list of additions with 62, and the sector remains the most heavily weighted index in the Russell 3000, at 17.1 percent. That said, technology’s weighting increased the most in the past year, and now comprises 17 percent of the overall index.
Russell research showed that Apple is expected to replace ExxonMobil as the largest company in the Russell 3000 in terms of market capitalization, with the companies valued at $540.2 billion and $367.7 billion, respectively. Apple’s market value grew by more than two-thirds in the past year, Russell said.
On the preliminary list, the largest addition to the Russell 3000 by market capitalization is Facebook, which had its initial public offering in May.
Among other noteworthy IPO additions to the Russell 3000 the indexing company cited are software maker Splunk Inc. and financial services provider EverBank Financial Corp.
WBIG hedges in some areas and bets big in others.
Today the news is full of stories about the collapsing pound. Not so much.
Real-world tracking difference is incredibly important. So why does nobody look at it?
The latest SPIVA scorecard is pretty depressing news for active managers.