Russell continues to make plans for an entrance into the ETF industry, recently detailing a host of small cap domestic equity funds to complement previously-planned large cap funds. Russell is the index provider behind many of the most widely-followed domestic equity indexes, and has been gearing up for a more direct role in the ETF industry over the last couple of years. In October 2010, the firm detailed a host of fundamentals-driven ETFs, including a Contrarian ETF, Growth at a Reasonable Price ETF, Low P/E ETF, and Aggressive Growth ETF. In that filing, Russell also included details on a suite of products that would slice up the Russell 1000 based on beta, volatility, and momentum indicators.
In a more recent filing Russell laid out similar plans for the small cap space, detailing five proposed funds:
- Russell 2000 Low Beta ETF: Linked to the Russell-Axioma U.S. Small Cap Low Beta Index.
- Russell 2000 High Beta ETF: Linked to the Russell-Axioma U.S. Small Cap High Beta Index.
- Russell 2000 Low Volatility ETF: Linked to the Russell-Axioma U.S. Small Cap Low Volatility Index.
- Russell 2000 High Volatility ETF: Linked to the Russell-Axioma U.S. Small Cap High Volatility Index.
- Russell 2000 High Momentum ETF: Linked to the Russell-Axioma U.S. Small Cap High Momentum Index.
No expense ratios or ticker symbols were included for the small cap funds, and the launch date for the Russell suite of ETFs has not yet been announced.
Active ETF Push Ahead?
Russell has also been laying the groundwork for a venture into the active ETF space; last month the company completed its acquisition of Reno-based U.S. One, the firm behind the One Fund (ONEF). Russell and U.S. One wasted little time filing details on more actively-managed fund-of-fund ETFs, detailing plans for the Russell Global Opportunity ETF (ONEO), Russell Bond ETF (ONEB), and Russell Inflation ETF (ONEI).
With that acquisition Russell potentially accelerated its ability to launch actively-managed ETFs. The SEC has been engaged in a review of the use of derivatives in mutual funds and ETFs for close to a year, and the approval process for new exemptive relief applications has ground to a halt as a result of that study. By acquiring U.S. One, Russell acquired the firm’s exemptive relief and the ability to get a head start on the crowd of mutual fund powerhouses waiting for the SEC to green light their ETF ambitions [see Handicapping The Active ETF Race].
Russell has also announced a partnership with Research Affiliates, the firm founded by Rob Arnott, on a suite of fundamental indexes. The 24 domestic and international equity indexes recently introduced are fundamental-weighted benchmarks, using adjusted sales, operating cash flow, and dividends plus buybacks as indicators of firm size. Many of Russell’s existing equity benchmarks, such as the Russell 1000, are market capitalization-weighted.
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Disclosure: No positions at time of writing.