Catherine Yoshimoto
- Texas is a Global Economic Force: Home to 1 in 10 US public companies, Texas ranks first in projected five-year economic growth—driven by its business-friendly climate and diverse sectors.
- Index Built for Precision & Liquidity: The index includes Texas-headquartered firms from the Russell 3000, with market cap and liquidity screens to ensure investability.
- Outperformance Potential: Back-tested data shows the Russell Texas Equity Index outperformed the broader Russell 3000 over 1-, 3-, and 5-year periods (ending March 2025).
In response to growing investor demand, FTSE Russell recently introduced the Russell Texas Equity Index as part of the Russell US State Equity Index Series. This new index is focused on companies based in the economic engine of Texas and is derived from FTSE Russell’s flagship US equity index series, the Russell US Indexes. The Russell US Indexes have approximately $10.6 trillion in associated assets benchmarked.[1]
Let’s explore what’s fueling investor interest in Texan companies and how the index is constructed.
Accessing a dynamic and diversified economy
Investors are increasingly seeking tailored exposure to the distinct economic profiles and growth potential of individual US states. Texas stands out as a particularly compelling case. By itself, Texas represents the eighth-largest economy in the world and it is home to one in ten publicly traded US companies[2]. Looking ahead, Texas ranks first among US states in five-year growth projections—an outlook driven by a business-friendly regulatory environment, absence of state income tax, robust infrastructure and a strategic geographic location.
While historically known for oil and gas, the Texas economy has diversified significantly into technology, healthcare, financial services and manufacturing. This evolution has been supported by a wave of corporate relocations, with major companies like Tesla, Charles Schwab, and Oracle moving their headquarters to the state.
The Russell Texas Equity Index offers investors a straightforward way to capture the momentum of this transformation, providing access to a thriving and evolving economy with strong prospects for continued growth.
Index construction
The index methodology is simple and designed with representativeness and investability in mind.
Starting with the Russell 3000® Index, eligible constituents are identified based on the following criteria:
- Inclusion is limited to companies that are headquartered in Texas.
- Securities with an investable market capitalisation below USD $500 million are excluded.
- Securities with a three-month rolling average daily trading volume lower than USD $3 million are excluded.
The index is initially weighted based on the float-adjusted market capitalisation of each index constituent. Capping is then applied following the RIC 10/45 methodology at the quarterly index reviews.
This ensures that, at each review, no more than 10% of the index’s weight is allocated to any individual company, and the sum of the weights of all constituents representing more than 4.5% of the index does not exceed 45% of the index in aggregate. Between quarterly reviews, index weights are allowed to drift from these thresholds to reflect changes in the market.
The Russell US State Equity Index Series is reviewed quarterly at the stock market close of the third Friday in March, September, and December. June’s re-weighting is completed at the same time as the annual reconstitution of the Russell US Indexes.
As shown below, the Russell Texas Equity Index offers diversified industry exposure and, based on a back-test, it outperformed the Russell 3000 index over one-, three-, and five-year periods ending March 31, 2025.
top 10 constinuents
| Constituents | ICB industry | Weight (%) |
|---|---|---|
| Tesla | Consumer Discretionary | 10 |
| Exxon Mobil Corporation | Energy | 10 |
| Chevron | Energy | 6.4 |
| Oracle Corp. | Technology | 6.1 |
| AT&T | Telecommunications | 4.7 |
| Caterpillar | Industrials | 4.2 |
| Texas Instruments | Technology | 4.1 |
| ConocoPhillips | Energy | 3.2 |
| Schwab (Charles) Corp. | Financials | 3.1 |
| Waste Management inc | Utilities | 2.3 |
| Total | 54.1 |
Source: FTSE Russell. As of March 24, 2025 open.
Russell Texas Equity Index ICB Industry Breakdown
Source: FTSE Russell. As of March 24, 2025 open. Past performance is no guarantee of future returns. Please see the end for important legal disclosures.
Source: FTSE Russell. As of March 31, 2025. Index launch date is April 28, 2025. Returns shown before the index launch date reflect hypothetical historical performance. Past performance is no guarantee of future results. Please see the end for important legal disclosures.
In summary, Texas continues to distinguish itself with strong growth and sector diversity (see the pie chart for the Russell Texas Equity Index ICB Industry breakdown).
For equity investors seeking to complement broad US exposure, the Russell Texas Equity Index provides a rules-based tool to implement single-state investment in this dynamic economy.
[1] Source: FTSE Russell. Data as of June 30, 2024 as reported on December 7, 2024 by eVestment for active institutional funds, Morningstar for active mutual funds, insurance products, and ETFs, and passive assets directly collected by FTSE Russell. AUM includes blended benchmarks and excludes futures and options. AUM data does not include active and passive assets not reported to a 3rd party source or FTSE Russell. For funds where the AUM was not reported as June 30, 2024, the previous period AUM was used as an estimate. No assurances are given by FTSE Russell as to the accuracy of the data.
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