Russell Investments, which owns the most widely used U.S. equity benchmarks for institutional investment products’, and Axioma, Inc., a leading provider of advanced tools for portfolio optimization and risk analysis, have collaborated to launch a series of long-only large and small cap factor indexes. These new Russell-Axioma U.S. Small and Large Cap Factor Indexes are designed to provide investors with tools to manage their portfolio’s exposure to–––and measure their performance against—five individual risk factors within their portfolios.
The series of factor-based indexes features:
· Russell-Axioma U.S. Large Cap High Beta Index
· Russell-Axioma U.S. Large Cap Low Beta Index
· Russell-Axioma U.S. Large Cap High Volatility Index
· Russell-Axioma U.S. Large Cap Low Volatility Index
· Russell-Axioma U.S. Large Cap High Momentum Index
· Russell-Axioma U.S. Small Cap High Beta Index
· Russell-Axioma U.S. Small Cap Low Beta Index
· Russell-Axioma U.S. Small Cap High Volatility Index
· Russell-Axioma U.S. Small Cap Low Volatility Index
· Russell-Axioma U.S. Small Cap High Momentum Index
“Our collaboration with Axioma, particularly leveraging their leading empirical research on factor development, has generated what we believe are more practical tools for tracking factor performance returns,” said Rolf Agather, managing director of index research and innovation at Russell Investments. “These ‘long-only’ factor-based indexes are designed to select securities using long-only stock holdings that capture specific exposures to targeted factors while also accounting for portfolio management and implementation considerations such as turnover and transaction costs.”
Sebastian Ceria, CEO of Axioma, said, “Non-traditional forms of beta sources can be powerful drivers of returns, yet they are largely underutilized. We are delighted to be teaming up with Russell, the industry leader in performance benchmarks, to bring pure risk factor indices to investors. Axioma’s powerful optimization technology and risk management expertise, combined with Russell’s index capabilities, will help clients implement their investment and hedging strategies with significantly less turnover and lower transaction costs.”
The Russell-Axioma U.S. Large Cap Factor Indexes start with the members of the U.S. Large-Cap Russell 1000 Index while the Russell-Axioma U.S. Small Cap Factor Indexes start with the members of the U.S. Small-Cap Russell 2000 Index. Each small or large cap index is then reduced down to those securities that meet the requirements of the specific factor index. The resulting small or large cap factor indexes are constructed using long-only stock holdings.
Russell and Axioma announced the first in a series of factor indexes in December 2009. These new indexes represent the latest instalment of this growing index family designed to meet the needs of investors who seek indexes that closely track specific factor returns.