January 14, 2021

Russell Growth and Value Indexes: the enduring utility of style

As of December 31, 2019, there were $5.7 trillion of active strategies using Russell US Style Indexes as performance benchmarks, and $466 billion using them as the basis for passive investment, for a total of $6.2 trillion in benchmarked assets. 

This review of the history and evolution of the Russell US Style indexes highlights some key findings:

  • The first Russell US Style indexes, the Russell 1000 Growth and Value Indexes, were originally developed to provide appropriate benchmarks for active managers that specialized in growth or value investing.
  • Soon, the indexes became used as the basis for passive investment; by splitting the market in two, investors were able to fill holes in style allocations when they could not find active managers to meet their requirements.
  • Differences in composition and performance of the indexes led investors to use the style indexes to implement strategic or tactical tilts away from the market. Because the two sides always sum up to the overall market, style allocation tilts are fully transparent.
  • The more recent focus on factors has not diminished the utility of style indexes as both benchmarks and transparent style-allocation tools.