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Back to all Intercontinental Exchange announcements

Russell Investments and Interactive Data Introduce Fair Value Adjusted Index Information for Select Russell Global Indices

Designed to Help Investment Professionals Effectively Track International Funds Investing in Foreign Equity Securities

Interactive Data Corporation (NYSE: IDC), a leading provider of financial market data, analytics and related solutions, today announced that its Pricing and Reference Data business will provide its Fair Value Information Service (FVIS) for international equities to Russell Investments for use in providing fair value adjusted information on Russell’s global equity indices.

This information is designed to help investment professionals effectively compare the performance of their international funds to benchmark indices by incorporating information that approximates the fund’s fair value procedures for international equity securities. Russell’s fair value adjusted index data will be available in a monthly report to clients of Russell Investments and Interactive Data, as well as to the public via Russell Investments’ website.

An important component of fund performance measurement is the concept of tracking error, which estimates the standard deviation of the differences between a mutual fund’s returns versus those of a comparable benchmark index. Generally, when comparing similar funds with identical returns, a fund with a lower tracking error is perceived to exhibit less risk. A research report by Interactive Data (whitepaper #14) revealed that comparing the performance of international mutual funds that employ fair valuation techniques for international equity securities with benchmark indices that do not include fair value adjustments can increase the fund’s perceived tracking error, which can be misleading. By compiling index data utilizing Interactive Data’s FVIS evaluations, Russell can help investment professionals make a more ‘apples-to-apples’ comparison of performance to a given benchmark.

Russell will initially provide fair value adjusted index data based on its equity indexes that reflect the following comprehensive market segments: Global, Global Large Cap, Global Small Cap, Global ex-U.S., Developed Large Cap, Developed ex-North America Large Cap, Developed Europe, Asia Pacific, Asia Pacific ex-Japan, Emerging Markets, Global ex-Frontier, and Global ex-Frontier Large Cap.

“Our top priority is to provide clients and end investors with the best possible measures of fund performance,” said Susie Caswell, senior product manager for Russell Indexes at Russell Investments. “By employing Interactive Data’s service on top of our truly reflective and modular index construction, we’ll serve those investment managers who use fair value adjusted pricing for their international funds with another way to examine returns. As the only index provider whose primary business is investment management, we understand the importance of accurate analysis of performance measurement.”

Caswell added that today’s announcement does not indicate a change to Russell’s index methodology, but it does present a new option for investment managers who would like to see the impact of Interactive Data’s fair value factors on specific Russell Indexes.

“We are very pleased to be working closely with Russell to advance their objective of providing indices that help investment managers accurately track fund performance,” said Liz Duggan, managing director, Evaluations. “Interactive Data believes that the mutual fund community can benefit from fair value adjusted benchmark index data from Russell, as it offers more of an ‘apples-to-apples’ comparison for measuring fund performance. We look forward to continuing to explore other applications for our Fair Value Information Services that can help address challenges faced by financial institutions.”

The result of extensive research and development, Interactive Data’s Fair Value Information Services reflect decades of leadership in providing mission-critical data to financial institutions worldwide. Interactive Data’s Fair Value Information Service is designed to provide information that can be used to estimate a price for an exchange-traded international equity security, equity index futures contract, or equity option that would likely prevail in a liquid market, in view of market information available at the time of evaluation. In January 2007, Interactive Data was awarded a patent by the U.S. Patent & Trademark Office for Fair-Value Pricing of a Financial Asset.