Russell Shifts Timing of Annual Index Reconstitution

February 11, 2004

Russell will shift the final day of its index reconstitution process to the last Friday in June, instead of the last day in June.

Tacoma/San Francisco - February 11, 2004. 

Russell's family of 21 U.S. equity indexes, which are annually reconstituted to keep them in tune with market realities, will be adjusted to the current market a few days earlier this year. Based on recommendations from the investment services industry, Russell will shift the final day of its index reconstitution process to the last Friday in June, which is June 25 this year, instead of the last day in June. This decision means the newly reconstituted index membership will be in effect when markets open on the following Monday, which is June 28 this year.

The new schedule gives the industry additional time over the weekend to manage any increase in stock trading volumes that occurs as funds and investors adjust for the newly reconstituted membership of the indexes.

Russell's Index Client Advisory Board - comprised of independent industry leaders including plan sponsors, investment managers and prime brokers - recommended the timing change. Board members advised that the change would help offer a larger window of time for trading, higher service standards for investors and a more secure environment for closing trades.

'As we update and maintain the Russell indexes, part of our responsibility is to listen to those who depend on them as market benchmarks and portfolio models,' said Lori Richards, senior product manager for the Russell indexes. 'We want to provide investors with an operational process that gives them an orderly and secure trading environment.'

A member of the advisory board, Sandy Rattray, managing director, Goldman, Sachs & Co, said, 'The Russell index reconstitution day is one of the busiest trading days in the U.S. equity market, particularly because passive managers are rebalancing small cap portfolios. Occasionally closing prices can be difficult to immediately determine on the rebalance day. Moving the date to the last Friday in June allows exchanges, asset managers and brokers plenty of time to be ready for the next trading day if operational issues arise.'

The advisory board's recommendation was based in large part on the fact that Russell indexes have emerged as the index family of choice for a growing number of money managers and plan sponsors. According to a June 2003 study based on data compiled by Thompson Nelson Information, Russell indexes are used as benchmarks for more institutional products than any other index family. Additionally, the amount of passively managed assets benchmarked to Russell indexes surpassed $350 billion in 2003, more than tripling from $116 billion at the beginning of 2000.

In practice, the securities held within Russell indexes for the month of June this year will be 'pre-reconstitution' from the beginning of the month through the close of U.S. equity markets on Friday, June 25. The new 'post-reconstitution' membership will take effect when the markets open Monday, June 28.

'The change in the rebalancing date will relieve pressure on operational personnel at broker-dealers and enable them to better serve investors,' said Donald Kittell, executive vice president of the Securities Industry Association, which originally recommended the change. 'SIA and its Data Management Division welcome Russell's action.'

Richards added that, as part of this decision-making process, Russell also researched whether to increase the frequency of its index reconstitution process. 'The research continues to show us that more frequent changes would involve substantial increases in transactional costs, but does not provide an offsetting benefit to investors in terms of market or segment representation,' she said. 'Our goal has always been to offer a family of indexes that accurately reflects the market without undue trading costs for investors.'

Additional details of Russell's annual index reconstitution process are available in the 'U.S. indexes' area on


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