Celebrating 25 years of the FTSE 250

Oct 13th, 2017 | By | Category: ETF and Index News

FTSE Russell is celebrating 25 years since the launch of the FTSE 250 Index on 12 October 1992. The first ETF to track the index was launched 13 years ago. Since then, strong performance and the index’s role as a proxy for the health of the UK economy has seen ETF assets linked to the mid-cap index rise to over £1.5 billion.

Celebrating 25 years of the FTSE 250

FTSE Russell employees ring the London Stock Exchange opening bell on 12 October 2017 to celebrate 25 years of the FTSE 250.

Six different ETFs track the FTSE 250 in Europe, the oldest of which is the iShares Core FTSE 250 UCITS ETF (LON: MIDD), launched in March 2004. It is the largest ETF to track the FTSE 250 with £1.0bn in assets under management.

The cheapest and second largest ETF to track the index is the Vanguard FTSE 250 UCITS ETF (LON: VMID), with a total expense ratio (TER) of just 0.10%, compared to MIDD’s 0.40%.

Mark Makepeace, CEO of FTSE Russell, commented: “When we launched the FTSE 250 there were plenty of sceptics who thought index compilers should only be thinking in terms of large- and small-cap. FTSE Russell was a pioneer in this sense but even we couldn’t have predicted the success of the FTSE 250, a benchmark which is now widely acknowledged as a true reflection of the British economy”.

Much has changed in the last 25 years:

UK public sector net debt has risen from £200 billion to £1.7 trillion; one-year LIBOR has fallen from 6.9% to 0.60%; UK GDP has risen from £720bn to £1.9tn; and the world’s population has risen by over a third, to 7.5 billion people.

The index opened on 12 October 1992 at a level of 831, and recently reached a record high of 14,541 on 7 August 2017, meaning £1000 invested at inception would be worth over £17,000 today – a return of 13.6% per year. UK mid-caps have actually produced above-average performance more recently, with the FTSE 250 returning 14.1% per year over the past five years, compared to 9.1% returned by the FTSE 100 Index.

The market capitalisation of the companies included in the original FTSE 250 was just over £98 billion. Today, that figure has more than quadrupled to over £450 billion and captures approximately 17% of the FTSE UK Index Series’ total market capitalisation.

The index saw its largest one-day gain on 19 September 2008, the day the Federal Reserve announced the Troubled Asset Relief Program (TARP) in a bid to save global financial markets just days after the Lehman Brothers collapse; the index rose 7.75%. The largest daily fall came on 24 June 2016, the day following the Brexit referendum in the UK, when the index fell 7.19%.

The largest constituents at present are Smith (DS), Weir group and Halma, with weights of 1.2%, 1.1% and 1.1% respectively. An analysis of sector breakdown reveals the index is more concentrated than the FTSE 100 – the largest sectors in the FTSE 250 are financials (34.6%), industrials (25.8%), consumer services (18.3%) and consumer goods (7%), with all other sectors accounting for less than 4.5% each.

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