Morningstar has disclosed details of a new suite of equity indices designed to more accurately reflect the size and style dimensions of the US stock market.
Morningstar has unveiled a new suite of equity style indices that will be adopted as the reference benchmarks for nine live iShares ETFs.
Known as the Morningstar Broad Style Indexes, the indices are set to be adopted as the new reference benchmarks for nine US-domiciled iShares ETFs that collectively house over $7 billion in assets under management.
The indices are expected to be formally introduced in January 2021, with BlackRock implementing index transitions on its ETFs in late March 2021.
The nine iShares ETFs in question were originally launched in 2004 and are linked to first-generation style indices that each targets one of the three main investment styles (value, core/blended, and growth) within one of the three key capitalization segments of the US equity market (large, mid, and small).
While the existing and new incoming indices are broadly similar, there are some notable differences.
The incoming indices for the three large-cap style ETFs will offer expanded market cap coverage by including both large- and mid-cap securities, covering up to the 90th percentile (up from 70th percentile) of the total US stock market capitalization.
Similarly, the incoming indices for the three small-cap style ETFs will offer ‘Extended’ market access by covering securities between the 90th and 99.5th (up from 97th) percentiles of the US stock market capitalization.
On style orientation, the new indices will directly incorporate the methodology underpinning Morningstar’s Style Box – a widely used proprietary data visualization tool that maps the size and investment style of stocks and funds on a nine-point grid.
Ron Bundy, President of Morningstar Indexes, commented: “Style investing is the bedrock of many investors’ portfolios. Inspired by more than 30 years of independent research and analysis, the new Morningstar Broad Style Indexes aim to empower investors through a more flexible and intuitive framework for building US equity portfolios. As we look to expand our set of style indexes in the new year, we are proud of our enhanced relationship with iShares.”
Armando Senra, Managing Director and Head of iShares Americas at BlackRock, added: “iShares leads the ETF industry through our commitment to deliver a combination of innovation, quality, and value. Our continued relationship with Morningstar reinforces our value proposition and our willingness to use the scale of our platform to provide better solutions and outcomes for our clients. At the heart of this collaboration is our mission to deliver simplicity, diversification, and flexibility, enabling investors to efficiently build portfolios tailored to their risk and return targets.”
The expected administrative changes to the nine iShares ETFs are summarized as follows:
iShares Morningstar Large-Cap Value ETF (JKF US), which currently tracks the Morningstar US Large Value Index, will be renamed the iShares Morningstar Value ETF (ILCV US) and will transition to the Morningstar US Large-Mid Cap Broad Value Index.
iShares Morningstar Large-Cap ETF (JKD US), which currently tracks the Morningstar US Large Core Index, will be renamed the iShares Morningstar US Equity ETF (ILCB US) and will transition to the Morningstar US Large-Mid Cap Index.
iShares Morningstar Large-Cap Growth ETF (JKE US), which currently tracks the Morningstar Large Growth Index, will be renamed the iShares Morningstar Growth ETF (ILCG US) and will transition to the Morningstar US Large Mid Cap Broad Growth Index.
iShares Morningstar Mid-Cap Value ETF (JKI US) will adopt a new ticker, IMCV US, but will keep its current name. It will transition from the Morningstar US Mid Value Index to the Morningstar US Mid Cap Broad Value Index.
iShares Morningstar Mid-Cap ETF (JKG US) will adopt a new ticker, IMCB US, but will keep its current name. It will transition from the Morningstar US Mid Core Index to the Morningstar US Mid Cap Index.
iShares Morningstar Mid-Cap Growth ETF (JKH US) will adopt a new ticker, IMCG US, but will keep its current name. It will transition from the Morningstar US Mid Growth Index to the Morningstar US Mid Cap Broad Growth Index.
iShares Morningstar Small-Cap Value ETF (JKL US) will adopt a new ticker, ISCV US, but will keep its current name. It will transition from the Morningstar US Small Value Index to the Morningstar US Small Cap Broad Value Extended Index.
iShares Morningstar Small-Cap ETF (JKJ US) will adopt a new ticker, ISCB US, but will keep its current name. It will transition from the Morningstar US Small Core Index to the Morningstar US Small Cap Extended Index.
iShares Morningstar Small-Cap Growth ETF (JKK US) will adopt a new ticker, ISCG US, but will keep its current name. It will transition from the Morningstar US Small Growth Index to the Morningstar US Small Cap Broad Growth Extended Index.