FTSE 100: London's Global Benchmark
London Stock Exchange Foreword- Nikhil Rathi, CEO, LSE plc
FTSE 100: LONDON’S GLOBAL BENCHMARK
The UK has always been at the forefront of financial innovation, bringing UK and international companies and investors together to raise and invest capital efficiently. Firms from 100 countries are listed on London Stock Exchange and the FTSE 100 index is seen as the global benchmark for blue-chip firms listed on our markets. An index tracks the performance of a basket of securities and is increasingly used by investors to issue investment products, such as exchange traded funds (ETFs), and to measure performance.
Created by FTSE Russell over 30 years ago, the FTSE 100, as its name suggests, tracks the performance of the 100 largest eligible companies listed on London Stock Exchange ranked in order by their market capitalisation. When the FTSE 100 first launched, the combined value of companies was around £160 billion, but today this stands at over £2 trillion – a testament to the growth of our global capital markets.
Constituents of the index operate in more than 150 countries around the world and more than two thirds of their revenues are generated overseas, with the ability to report in a wide variety of currencies including US Dollars. They represent diversified sectors too, operating across more than 10 sectors with consumer materials and basic materials leading the way. Global household names include Barclays, BP, Diageo, Easyjet, and Legal & General. Constituents of the index also mirror the evolution of our dynamic economy, with the likes of food order and delivery service, Just Eat, starting its public life on our High Growth Segment and now a constituent of the FTSE 100.
Like most financial innovation, the growth of indexes was born out of customer demand. Today some $15 trillion in global assets under management are benchmarked to FTSE Russell indexes and the Group provides data and analytics tools in addition to the thousands of indexes that they calculate daily. Passive investment in equities has risen by almost 400 per cent in the last twenty years, an approach increasingly deployed by investors both large and small. In turn, it has also led to the emergence of more bespoke indexes, such as those screening constituents linked to environmental, social and governance (ESG) factors and ‘Smart-Beta’ indexes, which track alternative strategies rather than the traditional market-cap weightings.
Through London, global blue-chips are looking outwards whilst securing strong inward investor support. Deep market liquidity provides them with increased access to long-term capital, allowing them to innovate, grow and create jobs.
This is a clear demonstration of international investor confidence in UK plc. And more broadly, deep and liquid capital markets reduce the cost of investment capital and global clearing liquidity pools cut the cost of regulatory capital.
The FTSE 100 complies with the highest governance standards, with rule-based methodologies and independent governance committees. Making sure that indexes serve their users – that they are constructed with transparency, objectivity and integrity – is crucial.
Public awareness of indexes is at an all time high and has become a key component of financial market infrastructure. The FTSE 100 remains the UK’s globally recognised benchmark. FTSE 100 constituents have embraced innovative new strategies, fostered global outlooks and driven economic success in the UK and in the countries in which they operate. We look forward to welcoming the company leaders of tomorrow from across the world seeking to achieve the FTSE 100’s aspirational status.