LSE to acquire Russell, creating major player in ETF indexing space

Jun 26th, 2014 | By | Category: ETF and Index News

London Stock Exchange Group (LSE) has been successful in its bid to acquire the Frank Russell Company from Northwestern Mutual and other minority shareholders for total cash consideration of $2.7 billion.

LSE acquires Russell creating major player in ETF indexing space

LSE Group’s acquisition of Frank Russell, which includes the widely respected Russell Indexes brand, propels the combined FTSE/Russell indexing business into the very top tier of index providers to ETFs.

The board of LSE believes the acquisition, to be finalised later this year, pending regulatory and shareholder approvals, is a rare opportunity to acquire a high quality US business with a leading global indexing brand – Russell Indexes.

The acquisition comes at a time when passive index-linked investing – particularly via exchange-traded funds (ETFs) – is fast taking market share from traditional active strategies.

The combination of Russell Indexes with FTSE, LSE’s existing index brand, creates a global leader in index services and a major provider of indices to ETFs.

Deborah Fuhr, founder and managing partner of ETP industry consultancy ETFGI, said: “The acquisition of Russell’s index businesses will add an important dimension to FTSE’s US offering and footprint. Based on ETFGI’s May 2014 data the combined entity will have 418 ETFs/ETPs with $343 billion tracking their indices which would rank them as the third largest index provider to the global ETF/ETP industry.”

MSCI, a favourite of institutional investors, and S&P Dow Jones, the provider behind the S&P 500 and Dow Jones Industrial Average indices, take the top two spots.

Russell Indexes is perhaps best known for the Russell 2000 Index of US small cap stocks. This index, along with its spin-offs, is the reference index for more than two-dozen ETFs listed on exchanges all around the world. BlackRock’s iShares Russell 2000 ETF (IWM), listed on the NYSE Arca, is the largest of these with more than $26 billion in assets under management.

In addition to passively managed index-linked assets, the combined index division brings together $5.2 trillion of assets benchmarked to Russell indices and an estimated $4.0 trillion of equities benchmarked to FTSE indices.

Commenting on the acquisition, Xavier Rolet, Chief Executive of LSEG, said: “Russell’s index management business is a strong strategic fit with FTSE. With this acquisition we are strongly positioned for the changing dynamics in the global indices market with a best-in-class offering, which we believe will help deliver outstanding returns for our shareholders.”

Len Brennan, President and Chief Executive Officer of Russell, said: “The combination of our index business with FTSE creates a truly global index leader, with a highly complementary fit of products and distribution capabilities and a unique position as a leader in major domestic market benchmarks as well as international equities.”

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