Russell Indexes Gain Market Share By John Spence July 3, 2002

Russell indexes are becoming more widely accepted by institutional investors, according to a recent study of over 3,6000 U.S. equity products listed in Nelson Information's Marketplace Web database. The 10 most commonly used U.S. equity benchmarks are listed below.

Top U.S. equity benchmarks ranked by usage
Rank	Index
1	Standard & Poor's 500
2	Russell 2000
3	Russell 1000 Value
4	Russell 2000 Growth
5	S&P MidCap 400
6	Russell 1000 Growth
7	Russell 2000 Value
8	Russell 2500
9	Russell Midcap
10	Russell Midcap Growth

The index licensing business has become a lucrative industry in recent years as assets in passively managed funds have grown. Russell estimates that assets in funds benchmarked to Russell indexes topped $214 billion in 2001, while Standard & Poor's says some $1 trillion is indexed to the S&P 500 alone.

The top ten index-linked ETFs are also a good indicator of which benchmarks are currently most popular with investors.

Rank	ETF	Symbol	Net Assets	% of Total ETF Assets
1	S&P 500 SPDR	SPY	$29,701,985,850	33.15%
2	Nasdaq-100 Index Tracking Stock	QQQ	$19,359,259,500	21.60%
3	S&P 400 MidCap SPDR	MDY	$6,716,739,150	7.50%
4	iShares MSCI EAFE	EFA	$4,118,580,000	4.60%
5	iShares S&P 500	IVV	$3,952,323,000	4.41%
6	DJIA DIAMONDS	DIA	$3,349,501,560	3.74%
7	iShares Russell 2000	IWM	$3,200,475,000	3.57%
8	iShares S&P SmallCap 600	IJR	$1,353,460,000	1.51%
9	Vanguard Total Market VIPERs	VTI	$1,240,037,280	1.38%
10	iShares Russell 3000	IWV	$1,119,420,000	1.25%

Many new fish have entered the indexing pond to nibble on growing passive assets. UBS Global Asset Management has licensed the new Morningstar benchmarks, and the New York Stock Exchange recently launched equity indexes that could be the basis for future exchange-traded funds. The Big Board indexes are calculated and maintained by Dow Jones Indexes.

Fund tracker Lipper has also introduced brand new indexes based on actual stocks held by mutual funds from various categories. The move represents a change in thinking about benchmark methodology, with active managers determining market capitalization and style boundaries, rather than objective rules or a committee.

However, advances in index methodology may obscure the established benefits of index funds, notes FundAlarm gadfly Roy Weitz in his brilliant monthly commentary on the fund industry.

"Indexing works as an investment strategy because it forces investors to own low-cost, diversified portfolios that are constructed with logic and long-term consistency," wrote the pragmatic Weitz in his latest round of colorful observations. "It's still far better to own a fund based on a theoretically imperfect index, if the alternative is some haphazard stock or fund portfolio."

New Japan ETF

Nomura Asset Management will launch an ETF tomorrow based on the FTSE Japan index. The fund will trade on the Osaka Securities Exchange, and will be followed by the launch of a FTSE Japan Futures contract on July 15th.