Russell indexes rank #1 in institutional usage

Benchmark survey finds a $500 billion increase this year alone

TACOMA, Wash.—Russell indexes continue to rank as the most widely used set of performance benchmarks among institutional investment products and, for the first time, now account for more than half of the benchmarks in funds used by corporate pension plans and other institutional investment organizations. A new survey measuring market share of various stock index families shows Russell’s family of U.S. indexes hold an industry-leading 52% share of the institutional market for benchmarks and Russell’s style indexes in particular continue to grow in popularity as benchmarks for active portfolios.

The survey also found about half (49.5%) of the $3.8 trillion in assets represented in the survey now are benchmarked to Russell indexes and, in terms of institutional usage, Russell indexes represent nine of the top 10. The small-cap Russell 2000Ã’ Index continues to rank as the second most commonly used equity benchmark in the U.S. institutional market.

These rankings were determined by a Russell research team’s examination of 2,954 U.S. equity products listed in Nelson Information’s Marketplace Web database.

"Professional investors know the importance of using the right tools when measuring relative performance of investment funds," said Lori Richards, senior product manager for Russell indexes. "Since Russell indexes are a direct outgrowth of our need for better tools to evaluate investment managers for our multi-manager investment business, they were specifically created as broadly representative and unbiased performance benchmarks. More investors seem to agree that this methodology leads to the most relevant indexes available."

Russell’s family of indexes was the only major set of benchmarks to gain market share based on product usage this year, continuing a trend identified by Nelson in its original survey of benchmark usage in 1998. Russell’s market share has increased from 18.5% in 1996, 27.9% in 1998 and 39.3% in 2002.

"Russell created its indexes to be used as benchmarks by institutional investors," said Kelly Haughton, strategic director for Russell indexes. "We are heartened to see that Russell indexes are the benchmarks of choice among investment managers of institutional U.S. equity funds."

The strongest shift among Russell indexes was the surge in use of Russell’s growth and value style indexes. The Russell 1000Ò Value Index, for example, now is the benchmark of choice for 243 investment products, increasing from 25 in 1996 and 219 last year at this time.

Individually, the top 10 U.S. equity benchmarks ranked by usage are the Standard & Poors 500 Index, Russell 2000Ã’ Index, Russell 1000Ã’ Value Index, Russell 1000Ã’ Growth Index, Russell 2000Ã’ Growth Index, Russell 2000Ã’ Value Index, Russell MidcapÃ’ Growth Index, Russell 2500â„¢ Index, Russell MidcapÃ’ Value Index, and Russell 3000Ã’ Index.

Russell originally developed and still uses its indexes as tools to help pension plan sponsors and other investors evaluate the performance of active investment managers. The indexes also help investors assemble and evaluate a total portfolio by using benchmarks that reflect particular market segments based on objective criteria, such as capitalization and tradable shares.

Russell determined that $2.5 trillion in assets is benchmarked to Russell indexes, according to a cross-examination of Nelson Information’s MarketPlace Web database, a Russell/Mellon client survey and Morningstar’s DataLab.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development