ETF Trends
ETF Trends

Small-cap exchange traded funds followed the broader market lower Friday with with activity in a Russell 2000 ETF ramping up as managers buy and sell stocks to reflect the annual index reconstitution.

Russell Investments is rebalancing its indexes today. Investors are watching the performance of small-cap companies as they are shifted into and out of the index.

Russell shuffles the indexes once a year to reflect market changes. New stocks enter the small-cap Russell while others “graduate” to indexes tracking larger stocks.

Earlier this month, Russell provided a list of stocks being added and deleted to several indexes. The reconstitution normally takes place after the close of the last Friday in June. On Monday, Russell plans to post the final membership lists for the indexes.

“Index managers who are directly or indirectly tracking the Russell indexes will need to rebalance their portfolios at the end of the day, which always causes a spike in trading activity near the close. During the rebalancing at this time last year, about 7.5 billion shares were executed just in NYSE-listed stocks, 50 % higher than the daily average of 5.4 billion,” reports.

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