SYDNEY, 17 March 2011 - Russell Investments is aiming to capture the inherent value premium in the Australian stock market with the launch of its second Australian ETF, the Russell Australian Value ETF (ASX code RVL).
RVL taps into Russell research on value premiums which shows that over time passive value based strategies have typically delivered a premium of 1.5%-3% over the broad market in Australia.
There is also a growing investor desire to capture this premium, creating a compelling opportunity for Russell to bring this opportunity to investors in the easily accessible form of an ETF.
"Before launching RVL, we talked to a range of investors to see what they wanted and found there is a gap for something which provides an easy way to access this part of the market," said Scott Bennett, portfolio manager at Russell Investments. "Russell pioneered style based indexes back in 1987 and we are excited to utilise our well regarded index capabilities and decades of experience to develop a local solution for the Australian market".
RVL will provide exposure to a specially developed index, the Russell Australia High Value Index. The index works by taking the Russell Australia Large Cap Index and assigning all stocks a value score and a growth score based on price to earnings ratios and medium term earnings growth. From this each stock is given a total value score, which then determines the weight of each stock in the index.
First style-based ETF in Australia targets institutional investors
RVL will be the first style-based ETF to hit the Australian market and will have specific applications for institutions. It will aim to complement rather than compete with managed funds and can potentially be used as a plug for an active manager, while a new manager is being found. Alternatively for fund managers who only want a value exposure at certain time, the ETF can be a quick and easy way of tilting a portfolio towards value.
"We have spoken extensively to institutions about their needs and potential future use of ETFs and discovered there is a gap in the market for a flexible, value-style tool," said Mr Bennett
Another specific institutional use for RVL is for short term cash management. RVL provides a more targeted, easy to implement, exposure to help institutions manage shorter term cash positions.
RVL can also be used by managers who want to short value stocks, as opposed to accessing the exposure through a managed fund where it is only possible to go long.
In addition, RVL is well-suited to advisers and brokers, particularly those with a style based approach.
"As with our first ETF, we have invested heavily in researching what investors, in particular institutions want from an ETF and have developed this tailored solution. As Australia's first style-based ETF, we are hoping to provide an easy way to access the value premium in the Australian market," Mr Bennett concluded.
Russell's approach to building ETFs based on investor needs has resonated well with investors. Russell's first Australian ETF, the Russell Australia High Dividend ETF (RDV), has amassed over $140M assets under management since its launch less than a year ago.
About Russell
Founded in 1936, Russell Investments is a global financial services firm that serves institutional investors, financial advisers and individuals in more than 40 countries. Over the course of its history, Russell's innovations have come to define many of the practices that are standard in the investment world today, and have earned the company a reputation for excellence and leadership.
Through a unique combination of wide-ranging and inter-linked businesses, Russell delivers financial products, services and advice. A pioneer, Russell began its strategic pension fund consulting business in 1969 and today is trusted by many well-known worldwide institutions for investment advice. The firm has US$149 billion in assets under management (as of 09/30/10) in its investment funds, retirement products, and institutional funds, and is well recognised for its depth of research and quality of manager selection. Russell offers a comprehensive range of implementation services that helps institutional clients maximise their assets. Russell provides leading administration and member services to over 220,000 individuals through its Australian Member Administration Centre. The Russell Indexes calculates over 50,000 benchmarks daily covering 65 countries and more than 10,000 securities.
Russell is headquartered in Seattle, Washington, USA with offices in Amsterdam, Auckland, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto. For more information about how Russell helps to improve financial security for people, visit us at www.russell.com/au
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS License 247185 (RIM). This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. Any potential investor should consider the latest Product Disclosure Statement (PDS) for the Russell Australian Value ETF (RVL) in deciding whether to acquire, or to continue to hold, units in RVL. Only persons who have been authorised as trading participants under the Australian Securities Exchange (ASX) Market Rules can apply for units in RVL through the latest PDS. Investors who are not Authorised Participants looking to acquire units in RVL cannot invest through the PDS but may purchase units on the ASX. Please consult your stockbroker or financial adviser.
The Russell Indexes are trademarks of Frank Russell Company (FRC) and have been licensed for use by RIM. RVL is not sponsored, issued, sold or promoted by FRC and FRC makes no representation or warranty regarding the advisability of investing in RVL or in any of the securities upon which the Russell Index is based. FRC has no obligation or liability in connection with the administration, marketing or trading of RVL. FRC is not responsible for and has not reviewed RVL nor any associated literature or publications and makes no representation or warranty express or implied as to their accuracy or completeness. FRC does not guarantee the accuracy and/or the completeness of the Russell Indexes or any data included therein and FRC shall have no liability for any errors, omissions or interruptions therein.
Copyright 2011 Russell Investments. All rights reserved.
MKT/2865/0311
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