Russell launches highly tradable UK mid-cap index

Dec 4th, 2013 | By | Category: ETF and Index News

Russell Investments, a leading investment manager and index provider, has announced the launch of the Russell UK Mid 150 Index, an index providing a representation of the UK mid-cap market.

Russell launches highly tradable UK mid-cap index

The index has been designed in response to specific sell-side demand for exposure to the UK mid-cap market that can be traded with high efficiency.

The index comprises 150 stocks from across the mid-cap universe that are listed on UK stock exchanges and denominated in sterling.

As of October 31, 2013, major constituents included ITV, Whitbread, GKN, InterTek Group, Resoltuion, IMI, Weir Group, Babcock International Group, Bunzl and Travis Perkins.

The index has been designed in response to specific sell-side demand for exposure to the UK mid-cap market that can be traded with high efficiency, and can be used as the basis for index-linked investment products such as swaps, futures and exchange-traded funds (ETFs).

Traditionally, trading in the UK mid-cap market segment has proven challenging, especially when executing large trades. This is largely due to liquidity issues and capacity constraints associated with existing products available in the market place.

The index negates these challenges by using an innovative screening process whereby on a monthly basis stocks are screened according to their capacity to be traded in volume. This approach to constituent selection ensures that the index as a whole can be easily and rapidly traded within an index-based portfolio.

Commenting on the launch Gareth Parker, senior director of index research and design for Russell Investments Europe, said: “The UK Mid 150 Index follows Russell’s rules-based, transparent index approach and has been designed with our clients’ needs firmly in mind. The index is a trading-oriented one, and constituents are evaluated monthly in order to provide greater liquidity, higher capacity and lower costs for those looking to access UK mid-cap investment opportunities.”

Russell consulted with a number of large global investment banks and product issuers, including Barclays, Goldman Sachs and JP Morgan, to understand the needs of their buy side clients for products that are readily and quickly tradable, and have a high investment capacity in what can be a relatively illiquid market.

Stephane Degroote, sales director for indexes at Russell Investments Europe, added: “We are excited to have worked in close collaboration with key global investment banks to deliver a unique market access tool for the UK mid-cap segment. This is in response to growing investor demand for more tradable and cost-effective hedging, tactical investment and cash management solutions in small- and mid-cap stocks.”

The index is one of a series of alternative indices developed by Russell in recent years to provide better trading tools for European investors in small- and mid-cap equity markets. It follows the launch of the Russell Europe SMID 300 Index in 2012 to provide exposure to the 300 most rapidly tradable constituents from the small- and mid-cap equity opportunity set in developed Europe.

Headquartered in Seattle with offices globally, Russell calculates approximately 700,000 benchmarks daily covering 98% of the investable market globally, which includes more than 80 countries and more than 10,000 securities. Approximately $4.1 trillion in assets are benchmarked to the Russell indices.

The firm is a major player in the ETF indexing space, providing the benchmarks to more than 100 ETFs listed on various exchanges around the world. Among the largest Russell-linked ETFs, in terms of assets under management, are the US small-cap iShares Russell 2000 ETF (IWM) with $24.9 billion, the US large-cap iShares Russell 1000 ETF (IWB) with $8.5 billion and the US total market iShares Russell 3000 ETF (IWV) with $5.1 billion.

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