Company: Russell Investments
Category: Structured Products
Published: 11 December 2013
The FTSE 250, built primarily as a benchmark for UK mid cap equities, has some notable disadvantages if used as the basis for rapidly traded investable products, disadvantages that are reported as resulting in smaller than desired market capacity and higher than appropriate trading costs.
The Russell UK Mid 150 has been designed from the outset to address these disadvantages, primarily through more comprehensive liquidity requirements and new, unique measures to control borrow cost and ensure available borrow capacity. Despite fewer constituents it retains very high correlation to the FTSE 250 and a low tracking error, and has been reported by various investment banks as being approximately double the investment capacity and having a trading cost approximately a third lower. Thus, the Russell UK Mid 150 Index provides both a useful proxy for the performance of the UK mid-cap market segment, and also a suitable basis for tradable products on which exposure to and hedges against those segments can be built via swaps, futures and other tradable forms.