Russell Investments and Research Affiliates announced today the launch of a new index series based upon Research Affiliates’ unique Fundamental Index methodology. The Russell Fundamental Index Series will comprise 24 new indexes designed to offer beta solutions to investors who desire access to non-capitalisation weighted products.

Recognising the opportunity to bring alternatively weighted products to market, Russell Investments and Research Affiliates announced a partnership in 2010 to begin developing these indexes. The Russell Fundamental Index Series aims to provide a cost efficient alternative to active management through an index-based approach, adding another distinctive facet to Russell’s already robust offering of market capitalisation-weighted indexes. The new “strategy indexes” also can serve as a complement to cap-weighted passive investments.

“We are excited to merge our benchmark index design expertise with Research Affiliates’ notable research and product knowledge to create the innovative Russell Fundamental Index Series,” said Ron Bundy, managing director for Russell Indexes. “For investors seeking an active investment approach, these new indexes will offer much sought after alternative beta exposures with the transparency, objectivity and broad diversification they have come to expect from the Russell Index family.”

Bundy added that the launch of these new indexes does not change the firm’s belief that Russell’s market capitalization-weighted indexes remain best suited for benchmarking and are an excellent basis for investable products.

This index series will be based on the Research Affiliates Fundamental Index methodology of selecting and weighting constituents by fundamental measures of company size, as opposed to market capitalization. Using publicly available data, the three fundamental measures are a company’s adjusted sales, retained operating cash flow, and average dividends paid plus share buybacks. Currently, approximately US$60 billion in assets are invested in non-price weighted index strategies.

“Fundamental Index strategies have moved into the mainstream,” said Rob Arnott, chairman and CEO of Research Affiliates. “Major investors around the world are adding these strategies to improve portfolio efficiency and diversify their core equity portfolios. We believe the Russell Fundamental Index Series will help them accomplish these goals,” Arnott added.

Initially, the new Fundamental Index family features indexes based on the universe of securities in the US broad market Russell 3000 Index and the Russell Global ex-US Index. Together, both indexes capture 98% of the global investable market. They will be available for licensing to asset owners, investment managers and ETF and Mutual Fund sponsors.

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