April 26, 2012
Russell Investments has unveiled a new index designed to give investors in ETFs and other structured products access to the most liquid small-and mid-cap European stocks.
According to the index provider, the Russell Europe SMID 300 index was created after lengthy consultation with large financial institutions such as Deutsche Bank, Goldman Sachs and UBS.
Scott Stark, head of Russell Indexes Europe, said: “There is significant demand in Europe for an investable small- and mid-cap index from hedge funds, asset managers and the trading community looking to gain exposure to this area of the European equity market.”
Russell said its consultation with market participants revealed that many thought existing indices covering small- and mid-cap stocks lacked the liquidity needed to underlie products such as ETFs, where traders need to be able to buy and sell the index constituents quickly. The index methodology has therefore been designed with tradability in mind.
To qualify for inclusion, stocks must be listed on a European exchange and fall between the 75th and 95th percentile of the Russell Global Index—a float-adjusted, market capitalisation–weighted index of approximately 10,000 liquid and investable stocks—in terms of global market capitalisation.
Companies are then ranked in order of their “speed to trade”, which is the length of time it takes to complete a trade in its stock.
At present, British companies make up more than a quarter of the index, at 26.13%. The next most heavily featured countries are Germany (14.49%), France (9.04%), Sweden (8.28%) and the Netherlands (6.77%). Sector-wise, producer durables take the biggest share at 24.23%, followed by consumer discretionary (20.10%), materials and processing (13.04%), financial services (11.89%) and energy (8.69%). The index is rebalanced once a year.