What Is the FTSE Russell Index?

The FTSE Russell Index refers not to a single index, but to a family of market indexes managed by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG). These indexes are widely used by investors, fund managers, and institutions around the world to measure the performance of global equity and fixed-income markets. They serve as benchmarks for investment strategies, underlie index-tracking funds and ETFs, and provide a framework for assessing market segments by size, geography, or investment style.

FTSE Russell is the result of a merger between FTSE (Financial Times Stock Exchange) and Russell Investments’ index business. The two names remain as brands under the umbrella of FTSE Russell, and the firm offers some of the most well-known equity indexes globally, such as the FTSE 100 and the Russell 2000.

Origins and Structure

FTSE was established in 1984 as a joint venture between the Financial Times and the London Stock Exchange. Russell Investments, which launched its own indexing business in 1984, became particularly well known in the U.S. for creating the Russell 1000, Russell 2000, and the broader Russell 3000 indexes. These indexes gained popularity for their transparent construction methodology and frequent rebalancing.

In 2015, the London Stock Exchange Group acquired the Russell Index business and merged it with FTSE. The combined entity, FTSE Russell, became a major provider of index solutions covering a wide range of asset classes and geographic regions.

Key Indexes in the FTSE Russell Family

FTSE Russell’s offerings span global, regional, and country-specific indexes. Some of the most widely recognized indexes include:

• FTSE 100 Index: Tracks the performance of the 100 largest companies listed on the London Stock Exchange by market capitalization. It is considered a barometer of the UK stock market and economy.
• FTSE All-Share Index: Comprises around 600 UK companies and represents nearly 98% of the UK’s market capitalization.
• Russell 1000 Index: Measures the performance of the 1,000 largest U.S. companies, making it a proxy for the large-cap segment of the U.S. equity market.
• Russell 2000 Index: Tracks 2,000 small-cap U.S. companies and is widely used to gauge the performance of smaller, domestic-focused firms.
• Russell 3000 Index: Combines the Russell 1000 and Russell 2000, offering broad exposure to the U.S. stock market.

In addition to these, FTSE Russell provides indexes tailored to specific investment styles, such as value and growth indexes, as well as thematic indexes, ESG (environmental, social, and governance) indexes, and factor-based indexes.

Index Construction Methodology

FTSE Russell follows a rules-based and transparent methodology for index construction. This approach ensures consistency and replicability for investors who use the indexes to benchmark performance or as the basis for index-tracking investment products.

The process typically involves:

• Defining the Universe: The starting point is identifying all eligible securities within a particular region or market segment.
• Applying Inclusion Criteria: Securities are filtered based on factors such as minimum market capitalization, liquidity, and listing status.
• Ranking and Weighting: Companies are ranked according to market capitalization or other factors. Most FTSE Russell indexes are weighted by free-float-adjusted market cap, which means only the shares available for public trading are considered in calculating a company’s index weight.
• Rebalancing and Reconstitution: FTSE Russell conducts periodic reviews — often quarterly or annually — to update the composition of indexes based on changes in company size, eligibility, or other criteria. The annual reconstitution of the Russell Indexes in June is a major event in the U.S. market due to the volume of trading activity it triggers.

Use in Investment Products and Benchmarking

FTSE Russell indexes are widely used as benchmarks by active and passive investment managers. They form the basis for a range of financial products, including mutual funds, ETFs, and derivatives.

For instance, many ETFs directly track the Russell 2000 or FTSE 100 indexes. Pension funds and institutional investors also use FTSE Russell indexes to benchmark performance and assess asset allocation decisions. Moreover, the indexes are integrated into risk models and analytics tools used for portfolio construction and performance attribution.

Global Reach and Customization

While FTSE Russell is based in the UK and U.S., its indexes cover markets around the world. The company offers indexes for developed and emerging markets, including regional indexes such as the FTSE Emerging Index and FTSE Asia Pacific Index.

FTSE Russell also works with asset managers and institutional clients to create custom indexes that meet specific investment criteria, such as climate-focused benchmarks or indexes that screen companies based on ESG factors.

Governance and Transparency

FTSE Russell maintains an independent governance structure to oversee index rules and changes. Advisory committees comprised of external market participants provide input to ensure the methodologies remain objective and reflect market realities.

All changes to index methodology or composition are published in advance, allowing investors to anticipate and adjust accordingly. This level of transparency has helped FTSE Russell maintain credibility and widespread adoption across the financial industry.

The Bottom Line

The FTSE Russell Index family plays a central role in global investing. With widely tracked benchmarks like the FTSE 100 and Russell 2000, it provides investors with tools to measure and access a broad range of market segments. Built on transparent rules and supported by an independent governance process, FTSE Russell indexes are integral to investment decision-making, benchmarking, and product development across the financial ecosystem.