Russell and Axioma to Launch Factor-Based Indexes

December 16, 2009 ( – Index provider Russell Investments is teaming up with Axioma, Inc., a provider of tools for portfolio optimization and risk analysis, to create a series of factor-based indexes.

According to the announcement, the Russell-Axioma Factor Indexes will measure stock performance in various market segments, and feature a broad range of products to track the common risk factors used in the Axioma Robust Risk Models. 

Using Russell’s index methodology as the foundation, Axioma will utilize its optimization expertise and suite of global Robust Risk Models with the goal of minimum factor tracking error, maximum targeted factor exposure, minimum turnover, and neutrality to all other characteristics. 

The Russell-Axioma Momentum Indexes—the first in the series—“track momentum returns closely while simultaneously exhibiting a number of desirable, practical features related to index implementation and non-momentum factor neutrality,” according to a press release.  The firms note that the optimization methodology used to construct these indexes has been “tested extensively and validates the realized index characteristics and returns”. 

Goldman Sachs is the initial client for the new Russell-Axioma Momentum Indexes.  

Initial products will include the optimized Russell-Axioma U.S. Large Cap Momentum Index, which will be based on the Russell 1000 Index. The initial launch also will include the Russell-Axioma U.S. Small Cap Momentum Index, based on the Russell 2000 Index, and the Russell-Axioma U.S. Momentum Index, based on the broad-market Russell 3000 Index.