SOURCE: Russell Investments

Russell Investments

January 27, 2015 10:59 ET

Smart Beta Diversification: Long-Term Performance of Russell 1000® Equal Weight Index Relative to Its Market Cap Weighted Counterpart the Russell 1000® Index Illustrates Potential Benefits of Utilizing a Non Market Cap-Weighted Index Approach

SEATTLE, WA--(Marketwired - Jan 27, 2015) -  The U.S. large cap Russell 1000® Equal Weight Index outperformed its market capitalization weighted counterpart the U.S. large cap Russell 1000® Index for the five- and ten-year periods (annualized) ended January 20, 2015. And, while past performance is no guarantee of future performance, relative historical returns for these two indexes help illustrate the potential benefits to investors in blending an alternatively weighted and market capitalization weighted approach to market indexes when measuring market performance.

Equal weight indexes, which have existed for more than a decade, are considered one of the earliest examples of "smart beta" indexes. Russell Indexes applies a unique approach to its equal weight methodology, equal weighting sectors first, and then equal weighting the companies within each sector. The Russell 1000® Equal Weight Index reflects the largest securities in the U.S. equity market on an equal weighted basis while maintaining greater diversification across sector groups.

Rolf Agather, CFA -
Managing Director of Global Research & Innovation, Russell Indexes
"The Russell Indexes suite of smart beta indexes is designed to provide investors with new ways of segmenting and reflecting the global equity market beyond traditional market capitalization weighted indexes. Equal weight indexes are designed to include every sector within an investment universe while potentially lessening the impact of any one sector or company on overall index performance. And Russell's equal weight approach of equal weighting sectors, and then companies within sectors, is unique." 

John G. Feyerer, CFA -
VP, Product Strategy & Research, Invesco PowerShares Capital Management, LLC
"Alternatively weighted indexes are a great way for investors to take a more diversified and nuanced outlook on the markets. Smart beta indexes, such as equal weight, can be used individually or in tandem with more conventional market capitalization indexes."

For more information on the Russell 1000® Equal Weight Index, go to the Russell Investments website.

Russell Index Returns a/o Jan 20   2015
  Three Years
  Five Years
  Ten Years
Russell 1000® Equal Weight Index   -2.1%   8.4%   17.6%   15.8%   11.4%
Russell 1000® Index   -1.7%   11.7%   18.0%   14.8%   8.1%

Source: Russell Investments. Total returns, US dollar denominated.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.

Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index.

The Russell 1000 Equal Weight Index equal weights securities in the Russell 1000 Index on a quarterly basis. The index captures the risk and return performance of an equal weight investment strategy for U.S. large-cap stocks. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its respective indexes.

Opinions expressed by Mr. Agather & Mr. Feyerer reflect market performance as of January 20, 2015 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance. 

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Copyright © Russell Investments 2015. All rights reserved.

Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of London Stock Exchange Group.