FTSE Russell changes reconstitution to semi-annual event

FTSE RUSSELL CHANGES RECONSTITUTION TO SEMI-ANNUAL EVENT

FTSE Russell announced on Thursday that its reconstitution of its family of indexes will change from an yearly event to a semi-annual frequency.

The indexes are currently refreshed at the end of June each year but "based on more recent market dynamics and increased volatility," FTSE Russell decided to change to a semi-annual event, keeping the June reconstitution and adding a second beginning in November 2026.

The additional date will be contingent on a successful parallel test run in November 2025, according to FTSE Russell.

"With increased volatility within US equity markets over the past five years, compared to the prior fifteen years, moving to a semi-annual Russell reconstitution frequency to update membership changes earlier will enable greater alignment with the dynamic changes in the current market environment,” said Catherine Yoshimoto, director of product management of FTSE Russell.

The reconstitution by Russell usually results in one of the heaviest trading volume days of the year as it prompts fund managers to adjust their portfolios to reflect the new weightings and components.

Steven DeSanctis, equity strategist at Jefferies in New York, believes the move to a semi-annual reconstitution is a favorable outcome. DeSanctis said in a note "a second rebalance will help reduce the size of the trade in June, which has growth to exceed $100B since 2019. It will also provide corporates a second opportunity to be considered for index eligibility, if they fail to meet the criteria in June."

FTSE Russell said the semi-annual schedule will apply to size indexes such as the Russell 2000 RUT and Russell 1000 RUI while style index changes such as growth and value will only be made to new additions or membership movements.

In addition, Russell factor indexes, which currently rebalance in December will also be rebalanced in November as well as the December IPO inclusion and float/share changes.

DeSanctis expects turnover to rise only modestly due to the style changes remaining on an annual schedule.

(Chuck Mikolajczak)

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