Russell Launches New Smart Beta Index Range

May 01, 2014

Russell Investments has launched a new range of smart beta indexes, which are designed to help investors manage factor exposures in their portfolios.

The Russell High Efficiency Factor Index (HEFI) series uses a factor based weighting methodology to produce the indexes, which provides strong factor exposure with minimal active risk and low relative turnover.

HEFI is available on six Russell large cap equity indexes; Global, Developed, Developed ex-US, US, Developed Europe, and Emerging Markets.

According to a note from the provider, investment factors such as low volatility, momentum, quality and value are significant drivers of equity returns and these factors have persisted across markets and through time. “Factor indices are increasingly being used as tools by investors wishing to express a strategic or tactical view on one or more of these factors,” the note said.

Rolf Agather, managing director of global research and innovation at Russell Investments, said: “We began with the end user when conceptualising our new indices and tapped into Russell’s investment and index expertise to create them. Investors want more precise tools to access investment factors for desired outcomes. The HEFI methodology puts factor exposure at the heart of index construction.”

Scott Bennett, director of equity strategy and research at Russell, added: “The Russell HEFI Series focuses on equity market factors which are relevant, comprehensive, universally robust, persistent and implementable. In determining factor specifications for the new indices we relied on our extensive capital market insights and drew on our experience researching active managers, constructing multi-factor portfolios and designing market leading indices. And we ensured that all our factor specifications were consistent with academic research and were empirically relevant, using industry standard risk models.”

Russell recently published a smart beta survey, which found that European institutional investors are leading the way with smart beta adoption compared to their U.S. counterparts. The survey polled 181 asset owners with over $200 (€144) million under management.


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