Turning 30 is often regarded as a one-way crossing into permanent adulthood. At age 30, our years of getting established give way to years of being part of “the establishment,” in whatever social, political or professional form that may take.
This year our own 30-year-old, the Russell 2000® Index, takes its place as one of the most recognized U.S. equity market benchmarks. For those of us who build and operate the Russell 2000, having the index enter its fourth decade offers a moment for reflection – albeit a fleeting moment because the investment market measured by this index is changing faster than ever.
As a stock index, it’s come a long way. Before the Russell 2000 made its debut in 1984, investors were unable to accurately measure the U.S. small cap market segment or assess performance relative to the U.S. large cap segment. Any effort at small cap analysis was at risk of apples-to-oranges comparisons.
The Russell 2000 brought objectivity and precision to the U.S. small cap equity market, providing a way for investors to more precisely understand the characteristics and behavior of U.S. small cap stocks. In turn, this helped enable more precise asset allocation decisions. Eventually, the index helped define a distinct asset class that is now a mainstay in many portfolios.
To offer some perspective, I have authored a new paper, “The Russell 2000 Index: 30 years of small cap,” and produced a Q&A video, “Big picture on small cap.” Both pieces provide a retrospective by looking back through the lens of the Russell 2000, highlighting key U.S. equity market trends as illustrated by the history of the index from past to present.
By looking back, I am reminded of the incredible history and evolution of the U.S. small cap markets over the last three decades. I’m proud that Russell was a pioneer in helping to focus a spotlight on this vibrant market segment.
By looking forward, I am struck by the ecosystem of financial products that continues to grow up around the Russell 2000 and how many different ways investors have come to use the index as a strategic tool. We expect this trend to continue, even as our small cap index moves inexorably into its 30-something years.
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The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
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