waterfall

Assets Flood into Russell-Indexed Funds

waterfall

It may be a stock picker's market, but staid index funds have been attracting their fair share of mutual fund assets.

The Frank Russell Company reported that cash has been pouring into funds pegged to its equity benchmarks in the past two years. Assets in index funds hitched to the firm's 21 benchmarks roared to a record $214 billion in 2001, an increase of 85% over the past two years in the face of a bear market.

Profiting from an investment revolution
Year
Total assets in Russell index funds
1999
$116 billion
2000
$176 billion
2001
$214 billion
Source: Frank Russell Co.

The broad Russell 3000 in particular has stepped into the limelight - $95 billion currently resides in passive funds tied to the benchmark that covers 98% of the U.S. market.

"Investors who use Russell's indexes as benchmarks are increasingly using financial instruments based on them to implement their investment strategies," said Russell's Kelly Haughton, a strategist who helped design the indexes.

Other Russell benchmarks that have attracted considerable assets as of late include the Russell 1000 and Russell 1000 Value indexes, which measure large-cap companies. Currently, $39 billion is invested in passive funds based on the Russell 1000, while Russell 1000 Value index funds have racked up $31 billion, according to Russell.

San Francisco-based indexing leviathan Barclays Global Investors said assets under management in its passive funds tied to Russell indexes have nearly doubled in the past two years - from $34.6 billion to $67.8 billion. BGI has a history of managing funds for institutional clients but has made a foray into the retail market, launching 12 iShares exchange-traded funds based on Russell indexes. BGI spokeswoman Christine Hudacko noted that the iShares Russell 3000 and iShares Russell 2000 are among the top 10 ETFs by assets.

Top 10 ETFs by Assets
Fund
Assets ($ millions)
SPDR 500 (SPY)
29,109.7
Nasdaq-100 Index Tracking Stock (QQQ)
20,821.5
MidCap SPDRs (MDY)
5,440.0
iShares S&P 500 (IVV)
3,767.7
DIAMONDS Trust (DIA)
3,097.9
iShares Russell 2000 (IWM)
2,257.0
Total Stock Market VIPERs (VTI)
1,452.3
Technology Select Sector SPDR (XLK)
1,345.4
iShares Russell 3000 (IWV)
1,303.0
iShares MSCI EAFE (EFA)
972.3

Source: Morningstar data as of 2/28/02