(Bloomberg) --More than $7 trillion of equity funds are poised to face a big reshuffling next year as FTSE Russell adopts new rules to limit the influence of the largest stocks on some of its most popular benchmarks.
Starting in March, the index provider will apply caps on company weights in its widely followed US growth and value gauges in each quarterly and annual review, the index provider said in a statement late Friday. The changes are aimed to make sure that no individual company makes up more than 22.5% of a style index and those with a 4.5% representation or bigger in aggregate add up to no more than 45% of the index.
The move marks the latest response in the indexing industry to a lop-sided market where the ownership of the largest technology shares in many portfolios starts to push against regulatory limits, and players of all stripes are being forced to adapt. Two months ago, rival S&P Dow Jones Indices retooled its rules to curb the dominance of the largest companies.
FTSE Russell says the capping mechanism is being adopted after it received “generally supportive” feedback from its industry consultation in August. Back then, the firm said the proposal was driven by requests from some fund clients fretting in particular over the Russell 1000 Growth Index's (ticker RLG) runaway returns.
Russell style indexes are benchmarks for $7.2 trillion of assets, or 68% of the total linked to all its products under this brand.
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