Benchmarks Are Not Created Equal

Because benchmarks are an important part of investment due diligence, a plan fiduciary should carefully consider their selection. Two of the most common are FTSE Russell¹ and Standard & Poor’s². The RPAG Scorecard³ utilizes Russell and here’s why:

• Russell ranks each company in the investable universe according to its total market capitalization. The market cap is the primary tool to determine where a company belongs in the Russell Index. S&P uses a committee to make these decisions.
• Russell indices adjust each company’s capitalization ranking to eliminate closely held shares that aren’t likely to be traded. Using this float adjustment methodology, Russell creates benchmarks that aims to accurately reflect the market.
• Russell updates their indices’ holdings on a regular basis. Russell reconstitutes its indices annually, which assist in a truer representation of the market.
• Russell indices objectively allow the market to determine the index composition according to clear and published rules. The market determines which companies are included, not the subjective vote of a selection committee.

¹Russell U.S. Indexes are the leading U.S. equity benchmarks for institutional investors. This broad range of U.S. indexes allow investors to track current and historical market performance by specific size, investment style and other market characteristics.

²Standard & Poor’s (S&P) is the world’s leading index provider and the foremost source of independent credit ratings. Standard & Poor’s has been providing financial market intelligence to decision makers for more than 150 years. S&P Global divisions include S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts.

³The RPAG Scorecard System is a ranking of funds in approximately 30 asset classes to identify skillful managers utilizing quantitative and qualitative factors. Scores range from 1 to 10.

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