Russell Investments has launched the first five equity benchmarks in a series of equal weight equity indexes that reflect key US and global market segments.
The new Russell Equal Weight Indexes also manage for sector risk and they can be replicated to serve as the basis of investable products.
“These ground-breaking investment tools offer a practical, unique solution for investors who are interested in alternative weighting methods, such as equal weighting,” says Rolf Agather, managing director of index research and innovation at Russell Investments. “Russell’s research shows that the additional step of equal weighting sectors provides greater diversification benefits than a traditional approach which simply equal weights all constituents.”
Agather says Russell’s approach to the construction of equal weight indices is designed to address or eliminate issues such as inherent sector biases, potential capacity constraints and liquidity concerns as well as high turnover and rebalancing issues. To address the concern of sector risk posed by constituent equal weight indexes, for example, Russell first applies its equal weight methodology within each of the nine Russell Global Sectors: consumer discretionary, consumer staples, energy, financial services, healthcare, materials and processing, producer durables, technology and utilities.
The new indices will be maintained with daily corporate actions and monthly share adjustments as well as re-weighted quarterly. They also will be fully rebalanced each June when Russell reconstitutes its global family of market capitalisation weighted indexes.
Initially, the new family of indices will feature the US large cap Russell 1000 Equal Weight Index, US small cap Russell 2000 Equal Weight Index, Russell Midcap Equal Weight Index, Russell BRIC (Brazil, Russia, India, China) Equal Weight Index, and the Russell Greater China Large Cap Equal Weight Index.
