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Index IDEA: FTSE Russell diversified factor index highlights mid-cap value stock strength

US mid-cap stocks, currently defined as companies with between $25 million and $3.4 billion in total market capitalization, have led all other major US cap tiers over the last 15 years, as measured by the Russell Midcap Index. And, during this period, value-oriented midcap stocks have led growth-oriented midcap stocks, as measured by the Russell Midcap Pure Value and Russell Midcap Pure Growth Indexes.

The recently introduced Russell Midcap Diversified Factor Index, developed with JP Morgan Asset Management, puts these trends into even sharper focus. It uses a risk allocation and multi-factor selection process using equity factors such as value, momentum and quality. The index seeks to diversify risk across sectors and stocks.  Based on historical back tested results, the index has outperformed the Russell Midcap Index for the YTD, one-, three-, five-, ten- and 15-year periods ended April 29.

Brad Zucker, Senior Product Manager at FTSE Russell:
“The Russell Midcap Index was developed as an institutional benchmark, covering approximately the lower 800 names within the Russell 1000 Index.  In the late 1980s investors needed not only a clean definition of US midcap securities, they also required benchmarks for tracking growth and value stocks.  The Russell Midcap Diversified Factor Index takes this innovation a step further by enabling investors to gain a more nuanced view into factors driving performance of the US equity market.”

Robert Deutsch, Global Head of ETFs, JP Morgan Asset Management:
“Investors remain wary of rising equity valuations, declining return expectations and slowing economic growth. Innovative new indexes that seek to diversify risks more evenly across sectors while capturing equity market factors can be powerful tools to help them pursue their long-term investment objectives.”   

JP Morgan Asset Management recently launched the JP Morgan Russell Midcap Diversified Factor ETF, JPME, based on the Russell Midcap Diversified Factor Index.

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FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

Views expressed by Brad Zucker and Robert Deutsche of JP Morgan Asset Management are as of May 12th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the London Stock Exchange Group.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the Russell 1000, Russell Midcap, Russell Pure Midcap Value, Russell Pure Midcap Growth, Russell Midcap Diversified Factor Index or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this IDEA should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

 

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