Russell US indices will change from an annual to a semi-annual reconstitution schedule from November 2026, with market cap-weighted indices such as the Russell 2000 to begin rebalancing in November as well as June.
The decision was driven by evolving “market dynamics and increased volatility”, FTSE Russell said.
Style indices such as the Russell 2000 Value, however, will continue to rebalance fully just once a year – in June – but will be able to incorporate new additions and membership changes in November too
Catherine Yoshimoto, director, product management of FTSE Russell, commented: “With increased volatility within US equity markets over the past five years, moving to a semi-annual Russell reconstitution frequency to update membership changes earlier will enable greater alignment with the dynamic changes in the current market environment.”
According to figures from the firm, $10.6trn in assets were benchmarked to Russell US indices as of December 2023 – $2trn of which were managed passively.
ETFs tracking Russell US indices housed $658bn as of September 2024.
Fiona Bassett, CEO of FTSE Russell, said: “One of the most attractive features of the Russell US Indexes is that they are designed to represent the US equity market objectively in terms of capitalization and style.
“Moving to a semi-annual reconstitution frequency will ensure that the Russell US Indexes continue to represent the market, while maintaining the fundamental purpose of the index as a practical portfolio benchmark.”
In 2021, an academic paper found that rebalancing inefficiencies cost passive ETF investors almost 10bps a year compared to active peers – an assertion numerous industry participants pushed back on.
