U.S. Equity Indexes: Institutional Benchmark Survey
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Russell Indexes
Russell Research
2009 Annual Benchmark Survey
U.S. Equity Indexes:
Institutional Benchmark Survey
Summary
The data for 2009 show that the market share of the Russell
Russell Indexes Investments family of indexes has increased, while that of its nearest
remain the preferred competitor declined—continuing a trend that has been in place for
benchmarks for more over a decade.
than 63% of U.S.
Russell Indexes remain the preferred benchmarks for more than institutional equity
63% of U.S. institutional equity products. products.
Russell U.S. Indexes market share by products benchmarked
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Russell S & P All others combined
Russell Investments // U.S. Equity Indexes: Institutional Benchmark Survey
% market share Assessing and addressing the market’s need for
rational, transparent indexes
Building truly representative, objective and transparent benchmarks has always been the core
philosophy of Russell Indexes. As the previous chart demonstrates, the Russell methodology
has decisively won the market’s acceptance. Russell’s indexes surpassed S&P in terms of
market share in 2003 and have increased or maintained their lead ever since.
As shown in the table below, in the six years after Russell became the market share leader, the
number of products benchmarked to Russell Indexes has more than doubled.
Table 1: U.S. institutional equity products benchmarked
2002 2003 2004 2005 2006 2007* 2008 ...
Voir
Russell Research
2009 Annual Benchmark Survey
U.S. Equity Indexes:
Institutional Benchmark Survey
Summary
The data for 2009 show that the market share of the Russell
Russell Indexes Investments family of indexes has increased, while that of its nearest
remain the preferred competitor declined—continuing a trend that has been in place for
benchmarks for more over a decade.
than 63% of U.S.
Russell Indexes remain the preferred benchmarks for more than institutional equity
63% of U.S. institutional equity products. products.
Russell U.S. Indexes market share by products benchmarked
70
60
50
40
30
20
10
0
2002 2003 2004 2005 2006 2007 2008 2009
Year
Russell S & P All others combined
Russell Investments // U.S. Equity Indexes: Institutional Benchmark Survey
% market share Assessing and addressing the market’s need for
rational, transparent indexes
Building truly representative, objective and transparent benchmarks has always been the core
philosophy of Russell Indexes. As the previous chart demonstrates, the Russell methodology
has decisively won the market’s acceptance. Russell’s indexes surpassed S&P in terms of
market share in 2003 and have increased or maintained their lead ever since.
As shown in the table below, in the six years after Russell became the market share leader, the
number of products benchmarked to Russell Indexes has more than doubled.
Table 1: U.S. institutional equity products benchmarked
2002 2003 2004 2005 2006 2007* 2008 ...
Publié par
Langue
English
Russell Research
U.S. Equity Indexes:
Institutional Benchmark Survey
2009 Annual Benchmark Survey
Summary
The data for 2009 show that the market share of the Russell
Investments family of indexes has increased, while that of its nearest
competitor declined—continuing a trend that has been in place for
over a decade.
Russell Indexes remain the preferred benchmarks for more than
63% of U.S. institutional equity products.
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
Russell Indexes
Russell Indexes
remain the preferred
benchmarks for more
than 63% of U.S.
institutional equity
products.
% market share
0
10
20
30
40
50
60
70
2009
2008
2007
2006
2005
2004
2003
2002
Year
Russell U.S. Indexes market share by products benchmarked
Russell
S & P
All others combined
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
/
p 2
Assessing and addressing the market’s need for
rational, transparent indexes
Building truly representative, objective and transparent benchmarks has always been the core
philosophy of Russell Indexes. As the previous chart demonstrates, the Russell methodology
has decisively won the market’s acceptance. Russell’s indexes surpassed S&P in terms of
market share in 2003 and have increased or maintained their lead ever since.
As shown in the table below, in the six years after Russell became the market share leader, the
number of products benchmarked to Russell Indexes has more than doubled.
Findings
As investing trends toward more specifi
c exposures, the process of choosing benchmarks
has evolved. Today, asset managers and their clients are demanding benchmarks that are
appropriate for each portfolio. As a result, institutional investors are increasingly using
coordinated families of indexes that segment the market by cap size and by style.
›
Of the major index providers, only Russell is truly diversifi
ed with 41% small cap products,
35% large cap and 18% mid cap.
›
By contrast, 91% of the products benchmarked to an S&P index use the large cap S&P 500.
›
Virtually all of the products benchmarked to a Wilshire index use the total market
Wilshire 5000.
Plan sponsors and asset managers are using the family of Russell benchmarks for consistent
and comprehensive coverage across all asset segments. Russell’s indexes are frequently used
in conjunction with one another.
Table 2: Most frequently used U.S. equity benchmarks by product
Index
Number of funds
Total assets ($ bil)
S&P 500
918
1,886.4
Russell 1000
®
Growth Index
397
455.7
Russell 1000
®
Value Index
376
554.0
Russell 2000
®
Index
284
216.3
Russell 2000
®
Growth Index
265
97.4
Russell 2000
®
Value Index
241
135.8
Russell Midcap
®
Growth Index
177
116.3
Russell Midcap
®
Value Index
137
118.7
Russell 3000
®
Index
116
187.0
Russell 1000
®
Index
110
185.9
2002
2003
2004
2005
2006
2007*
2008
2009
Russell
922
1,148
1,355
1,536
1,693
1,776
1,793
2,554
S&P
1,170
1,072
1,051
1,030
1,010
930
785
1,069
Wilshire
37
43
29
28
15**
18
13
24
NASDAQ
19
16
15
14
14
13
4
6
L
i
p
p
e
r
1
8
1
6
8
6
5
5
4
7
D
o
w
J
o
n
e
s
8
7
6
3
3
2
0
1
5
A
M
E
X
—
—
—
—
7
2
0
1
M
S
C
I
—
—
1
1
2
2
3
1
6
Other
172
222
326
336
357**
286
231
320
TOTAL
2,346
2,524
2,790
2,954
3,106
3,034
2,833
4,012
Table 1: U.S. institutional equity products benchmarked
* Data from July 12, 2007 is
pulled from Nelson Information’s
MarketPlace web database at
the end of May, with the exception
of 2007.
** The Wilshire Real Estate Securities
Index began being added to “Other”
in 2006.
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
/
p 3
Trends
›
In 2009, Russell Indexes showed strength across the product line. As shown in Table 3 below,
eight Russell index products saw double-digit growth.
›
Within the Russell family of indexes, the most signifi
cant growth was in the Russell 1000
Index, which was adopted by asset managers to benchmark an additional 50 products.
This 83% growth rate was consistent with overall growth in the Russell 1000 Index series.
Altogether, 880 products are now benchmarked to the Russell 1000 Index, the Russell 1000
Growth Index, and the Russell 1000 Value Index—an increase of 51% over the previous year.
›
The Russell Midcap
®
series of indexes now has a greater than 90% market share in the
midcap segment. Last year, the style indexes led the way, with the Russell Midcap Growth
Index growing by 70% as it added more products. The Russell Midcap Value Index did
nearly as well, growing by 65%.
Percentage change 2008–2009
Russell 1000 Index
83.30%
Russell Midcap Growth Index
70.20%
Russell Midcap Value Index
65.10%
Russell 1000 Growth Index
52.20%
Russell 2000 Value Index
49.70%
Russell Midcap Index
47.30%
Russell 1000 Value Index
39.20%
Russell 2000 Growth Index
35.90%
Table 3: Percentage change in Russell products
0%
20%
40%
60%
80%
100%
S&P 500
Russell 1000 Family
2009
2008
2007
2006
2005
2004
2003
2002
1998
1996
Russell 1000
®
Family vs. S&P 500
% of U.S. institutional equity products
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
/
p 4
Russell dominates style benchmarks
Russell pioneered style indexes in 1987 and continuously monitors its style methodology to
make sure it is representative of manager practice. The most recent data shows that Russell
enjoys a greater than 99% market share of products benchmarked to style indexes.
Today, investors are building increasingly sophisticated products with precisely defi
ned levels
of risk versus their benchmarks. Thus, they require a high level of precision in the indexes they
use, as well as the ability to provide consistency over a broad range of products. As a result:
›
46% of all U.S. equity investment products use Russell Style Indexes as their benchmarks.
›
In dollar terms, more than $1.6 trillion is benchmarked to Russell Style Indexes, with
more than $800 billion benchmarked to the Russell 1000 Growth and Russell 1000 Value
Indexes alone.
Percent benchmarked to Russell Style Indexes
To sustain its leadership in index construction, Russell regularly performs comprehensive
studies of style methodology, testing alternative approaches to its style index construction.
Thus far, results have confi
rmed that Russell’s existing two-variable model is the best
representation of the growth and value opportunity set. Russell is currently in an advanced
stage of research into the new dimensions of investment styles.
This commitment to superior product design, objectivity, reliability and transparency
explains why Russell’s Style Indexes have become the nearly unanimous choice of
knowledgeable investors.
Total benchmarked to
any style index
Total benchmarked to
Russell Style Indexes
Type
Products
Assets ($bil)
Products
Assets ($bil)
Growth
984
734.7
979
713.6
Value
886
865.1
882
863.5
Total
1,870
1,600
1,861
1,577
Table 4: Style investing market share: 2009
Russell products %:
Growth
99.49%
Value
99.55%
Growth
97.14%
Value
99.81%
Russell assets %:
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
/
p 5
Most frequently used indexes
There is a simple reason why Russell Indexes are today the leading benchmarks for U.S.
equity investors—the fi
rm maintains a consistent focus on its statement of purpose:
›
Each index is designed to act as a performance standard for active managers.
›
Russell Indexes serve as proxies for asset allocation purposes.
›
Russell Indexes allow passive investors to purchase liquid and replicable vehicles for
executing their strategies.
Today, Russell’s U.S. equity index family is widely embraced by institutional investors, with
more than $3.9 trillion in assets benchmarked against them.
Russell’s market focus and commitment to providing objective, comprehensive, rules-based
and transparent benchmarks has helped it become the standard for investment professionals
globally.
Background
In the October 1998 issue of MarketPlace News, Nelson Information published a study
measuring the benchmarks that were most frequently used by U.S. equity investment
products. The study listed the top 25 benchmarks used among the 3,333 primarily
institutional products, including index funds, in the Nelson database. The analysis showed
that eight of the top ten fastest-growing benchmarks between 1996 and 1998 were Russell
indexes. The study also noted that usage of the S&P 500 Index as a benchmark had declined
signifi
cantly since 1996. While Nelson did not set out to measure market share in this study, it
is easily derived by combining benchmark usage data for each index provider.
Since this was a one-time study done by Nelson, Russell researchers used it as a starting
point in order to replicate its basic methodology in June 2002 and annually since then. Over
this period, they have found that the trend Nelson originally identifi
ed continues: more and
more institutional investors are using Russell Indexes as their benchmarks. In fact, in 2003,
the number of institutional investment products utilizing a Russell benchmark surpassed
those using an S&P benchmark for the fi
rst time. And in 2005, Russell surpassed S&P in
institutional assets benchmarked. This study is the latest installment in the series, which now
provides data covering a full decade.
Methodology
Like Russell’s index methodology, this market share calculation methodology is transparent.
The Morningstar data provides a comprehensive representation of U.S. institutional equity
products equivalent to the Nelson’s MarketPlace data historically used in the Russell
Institutional Benchmark Survey. Russell researchers found 4,012 U.S. institutional equity
products reporting a benchmark as of December 31, 2009.
Total assets benchmarked to the Russell family of indexes is calculated by combining the
results of the 2009 Institutional Benchmark Survey, variable annuity from the Simfund
database, assets benchmarked to the Russell family of indexes and the survey of passive-
investments managers conducted by Russell Indexes.
One limitation Russell observed in using Nelson’s original study (to calculate market share)
was that Nelson included products with unreported benchmarks in its calculations, causing
the percentage of products reporting use of a given provider’s index to be understated. Using
this method, in effect, gives “unreported benchmark” a market share. For example, in the
2008 Institutional Benchmark Survey, 29% of the U.S. institutional equity products did not
report a benchmark. To overcome this limitation, Russell adopted a common market share
calculation method by basing calculations only on those products for which a benchmark
was reported.
Russell Investments
//
U.S. Equity Indexes: Institutional Benchmark Survey
/
p 6
All data included in this presentation compiled by Russell Product & Marketing Research as of 12/31/09.
Historical data compiled using Russell client survey,
Nelson’s MarketPlace database and Morningstar Direct database. Historical Nelson’s Marketplace Information calculated as of June 30, beginning in 2002 and each
year thereafter through 2008.
Beginning in 2009, historical data compiled using Morningstar Direct. The primary difference between the historical information
provided by Nelson’s MarketPlace and Morningstar relates to the types of funds included in the computation.
Based on Russell’s research, Russell does not believe
the differences to be signifi cant.
Russell Investments is a Washington, USA, corporation, which operates through subsidiaries worldwide, and is a subsidiary of The Northwestern Mutual Life
Insurance Company.
The trademarks, service marks and copyrights related to the Russell Indexes and other indexes as noted are the property of their respective owners.
Indexes are unmanaged and cannot be invested in directly.
This is not an offer, solicitation or recommendation to purchase any security or services of any organization.
This material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from Russell Investments.
Copyright © Russell Investments 2010. All rights reserved.
First used July 2010.
CORP-6195
Disclosures
For more information about Russell Indexes call us or visit www.russell.com/indexes.
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