Russell indexes are objectively constructed and based on transparent rules. The broadest U.S. index is the Russell 3000E Index, which contains the largest 4,000 companies incorporated in the U.S. and its territories. Sub-indexes in the Russell 3000E Index are broken out by market capitalization and style. The members of the Russell 3000E Index and its subsets are determined each year during annual reconstitution and enhanced quarterly with the addition of initial public offerings (IPOs).

Annual reconstitution

Annual reconstitution is the process by which Russell indexes are completely rebuilt. Reconstitution is a vital part of the creation of a benchmark that accurately represents a particular market segment. Companies may get bigger or smaller over time, or periodically undergo change in their style characteristics. Reconstitution ensures that companies are correctly represented in the appropriate Russell indexes. On the last trading day in May, all eligible securities are ranked by their total market capitalization. The largest 4,000 become the Russell 3000E Index, and the other Russell indexes are determined from that set of securities. If 4,000 eligible securities do not exist in the U.S. market, the entire eligible set is included. Reconstitution occurs on the last Friday in June. However, at times this date precedes a long U.S. holiday weekend, when liquidity is low. In order to ensure proper liquidity in the markets, when the last Friday in June is the 28th, 29th or 30th, reconstitution will occur on the proceeding Friday.

Quarterly initial public offerings

Eligible IPOs are added to Russell U.S. indexes at the end of each calendar quarter (see the schedule in Section 4). An IPO is defined as any security newly available – truly for the first time – to the public for general investment. IPOs are added each quarter to make sure new additions to the investing opportunity set are reflected in our representative indexes. Russell focuses on IPOs each quarter because they were not available at reconstitution, and it is important to reflect market additions between reconstitution periods. If a security traded publicly previously, even on a restricted basis, it is not eligible for inclusion as an IPO. Such a stock may, however, be eligible during the next reconstitution period, along with all other eligible securities.