US mid-cap stocks, currently defined as companies with between $25 million and $3.4 billion in total market capitalization, have led all other major US cap tiers over the last 15 years, as measured by the Russell Midcap Index. And, during this period, value-oriented midcap stocks have led growth-oriented midcap stocks, as measured by the Russell Midcap Pure Value and Russell Midcap Pure Growth Indexes.
The recently introduced Russell Midcap Diversified Factor Index, developed with JP Morgan Asset Management, puts these trends into even sharper focus. It uses a risk allocation and multi-factor selection process using equity factors such as value, momentum and quality. The index seeks to diversify risk across sectors and stocks. Based on historical back tested results, the index has outperformed the Russell Midcap Index for the YTD, one-, three-, five-, ten- and 15-year periods ended April 29.
Brad Zucker, Senior Product Manager at FTSE Russell:
“The Russell Midcap Index was developed as an institutional benchmark, covering approximately the lower 800 names within the Russell 1000 Index. In the late 1980s investors needed not only a clean definition of US midcap securities, they also required benchmarks for tracking growth and value stocks. The Russell Midcap Diversified Factor Index takes this innovation a step further by enabling investors to gain a more nuanced view into factors driving performance of the US equity market.”
Robert Deutsch, Global Head of ETFs, JP Morgan Asset Management:
“Investors remain wary of rising equity valuations, declining return expectations and slowing economic growth. Innovative new indexes that seek to diversify risks more evenly across sectors while capturing equity market factors can be powerful tools to help them pursue their long-term investment objectives.”
JP Morgan Asset Management recently launched the JP Morgan Russell Midcap Diversified Factor ETF, JPME, based on the Russell Midcap Diversified Factor Index.
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Views expressed by Brad Zucker and Robert Deutsche of JP Morgan Asset Management are as of May 12th and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the London Stock Exchange Group.
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