• Notable decline in global market capitalization and correlation
• Strong performance for U.S. large-cap stocks, with technology sector leading the way
• Emerging Markets decline in capitalization relative to Developed Markets

SEATTLE--(BUSINESS WIRE)-- Today marks the first day of the newly reconstituted Russell Global Indexes following the completion of Russell’s annual index reconstitution on June 22. Final membership lists for the Russell Global, Russell 3000®, Russell 1000®, Russell 2000®, Russell Midcap® and Russell Microcap® Indexes, accounting for approximately $3.9 trillion in assets benchmarked, were confirmed after Friday’s market close. Final lists of additions and deletions are available on the Russell reconstitution website.

Market Capitalization

Global market capitalization, as reflected in the post-reconstitution Russell Global Index, had a notable decline, decreasing from $52.2 trillion on May 31, 2011 to $44.2 trillion on May 31, 2012. U.S. market cap, as illustrated by the Russell 3000 Index, declined from $16.7 trillion to $15.8 trillion during this same period.

“The strong performance of the global markets in the first quarter of 2012, led by large-cap stocks in the U.S., showed in the all-time high of the Russell 1000 Index on April 2,” said Stephen Wood, chief market strategist for North America at Russell Investments. “However, international turmoil over the last few months has contributed to a decline in the global equity market and a resulting drop in market capitalization of the Russell global index family, as shown during the annual rebalancing process.”

In terms of total company capitalization, ExxonMobil dropped from first to second position among U.S. stocks in the Russell 1000 Index at reconstitution, exhibiting a significant shift from growth to value. Overall, the Russell U.S. indexes reflect a market shift over the past year to higher returns in growth stocks. Growth-oriented Apple Inc. took the position as the largest stock in the Russell 1000 ($540.2 billion), with a 68% capitalization increase since May 31, 2011.

Sector Leadership

At 17.1%, Technology became the largest sector in the Russell 1000 Index at rebalance, overtaking Financial Services at 16.7%. This was partially due to the inclusion of Facebook, the largest addition to the Russell Indexes globally, to the Technology sector of the Russell 1000 Index.

Technology also led U.S. small caps in the biggest increase year-over-year, as 37 Technology companies joined the Russell 2000 Index. Financial Services continues to be the largest sector in the Russell 2000 Index, even though 17 Financial Services stocks graduated to the U.S. large-cap Russell 1000 Index.

Global Markets & Correlations

Malaysia, China and Hong Kong showed the largest percentage increase in country weight within the Russell Global Index since last year’s reconstitution. China remains the world’s third largest country in terms of total market capitalization behind the U.S. and Japan. And emerging markets declined materially against developed markets over the past year, decreasing their Russell Global Index weighting from 14.7% to 13.7%.

Since last year’s rebalance there has been a notable decrease in equity correlations across global markets, as demonstrated by the Russell global index family. After the 2011 reconstitution, the rolling monthly trading correlation between the U.S. large-cap Russell 1000 Index and the Russell Developed Europe Index was at a high of 0.92, which dropped to 0.66 as of May 31, 2012. The shift in correlation between the Russell Developed Europe Index and the Russell Asia-Pacific Index has been even more dramatic, falling from 0.55 just after last year’s reconstitution to as low as -0.18 in recent weeks.

Russell’s index reconstitution process this year was marked by a relatively low turnover rate in underlying constituents, which Russell Indexes attributes to ongoing fine tuning of the reconstitution methodology.

And to complete this year’s reconstitution, the “Closing Cross,” NASDAQ’s trading mechanism that simultaneously brings together the buy and sell interests for investors in specific NASDAQ, NYSE and NYSE Amex stocks to execute all shares for each stock at a single price, was successfully executed on the NASDAQ exchange on Friday afternoon just prior to the U.S. market close. According to NASDAQ, in 1.15 seconds, the NASDAQ Closing Cross executed approximately 687.9 million shares representing $9.5 billion across 2,195 NASDAQ-listed stocks.

“Throughout its nearly 30-year history of index construction Russell has drawn on its unique insight into global capital markets and multi-asset portfolio construction and implementation to design benchmarks offering exposure to the true performance of different segments and asset classes of the market,” said Rolf Agather, global head of index research and innovation at Russell. “The annual reconstitution helps ensure that our indexes truly reflect the current state of the global markets.”

About Russell Investments

Russell Investments (Russell) is a global asset manager and one of only a few firms that offer actively managed multi-asset portfolios and services that include advice, investments and implementation. Working with institutional investors, financial advisors and individuals, Russell’s core capabilities extend across capital markets insights, manager research, portfolio construction, portfolio implementation and Indexes.

Russell has about $155 billion in assets under management (as of 3/31/2012) and works with 2,400 institutional clients, more than 580 independent distribution partners and advisors, and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell has $2.4 trillion in assets under advisement (as of 12/31/11). It has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell traded more than $1.5 trillion in 2011 through its implementation services business. Russell calculates more than 80,000 benchmarks daily covering approximately 98% of the investable market globally, 83 countries and approximately 10,000 securities. Approximately $3.9 trillion in assets are benchmarked to the Russell Indexes (as of 12/31/11).

Russell is headquartered in Seattle, Washington, USA, Russell has offices around the world including Amsterdam, Auckland, Beijing, Chicago, Frankfurt, London, Melbourne, Milan, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. For more information about how Russell helps to improve financial security for people, visit www.russell.com or follow us @Russell_News.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.Russell Investments is the owner of the trademarks, service marks and copyrights related to its respective indexes.Russell’s indexes are unmanaged and cannot be invested in directly.

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.

For Russell Investments
Adam Grodman, 212-909-4781
agrodman@intermarket.com
or
Tim Benedict, 212-702-7823
TBenedict@russell.com

Source: Russell Investments