FTSE Russell is weighing a major shift to its benchmark methodology, proposing to allow growth or value stocks to claim up to 60% of the Russell 1000 and Russell 2000 indexes. For nearly four decades, the index provider has maintained an even 50/50 split between growth and value companies. But the rising dominance of technology megacaps has made that balance harder to sustain while keeping broad representation.
Under the proposal released Monday, a diversification factor would let either style deviate by up to 10 percentage points when market concentration materially affects the underlying opportunity set. The consultation ends Dec. 11, with any changes taking effect during the June 2027 reconstitution. Russell's style indexes were benchmarked to about $8 trillion of assets last year, and an overhaul could prompt funds tracking those indexes to reshuffle holdings.
The move reflects growing pressure on index providers to adapt traditional valuation measures. S&P Dow Jones Indices is also reviewing its classification methods, including incorporating intangible assets and free cash flow. Russell ultimately settled on a sales-to-price metric, citing limited turnover impact, as internally developed intangibles are typically expensed rather than capitalized.
Carlos Diez, founder of Market Grader, noted that many companies struggle to map cleanly into growth or value categories, especially when expensive names dominate. The number of growth companies in the Russell 1000 has fallen to 368 this year, down from 626 two decades ago.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing