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Fund News Advisors Can Use: FTSE Russell Rebalances Indexes Next Week

In this week’s fund news, meme stock GameStop creeps into the Russell 1000 index, the SEC punts a decision on a Bitcoin ETF yet again, and the House passes ESG disclosure legislation.

Global index provider FTSE Russell is gearing up for its annual reconstitution process, where the company rebalances its indexes to reflect equity market changes in the last year. The changes take effect after market close on June 25.

The company said total U.S. equity market capitalization grew 52% over the last year, reaching $47.7 trillion as of May 2021. Four companies had market caps over $1 trillion, including Microsoft, Apple, Amazon and Alphabet, which passed the milestone this year. Tesla and JPMorgan Chase joined the top 10 companies in the Russell U.S. Indexes.

“In 2020, overall capitalization for the US equity market stayed fairly flat, decreasing by 1%,” said Catherine Yoshimoto, FTSE Russell director of product management, in a statement. “However, we’ve seen a surge in growth in the first half of 2021 with the total market cap in the Russell 1000 reaching $44.1 trillion. We have also seen a resurgence in market capitalizations of small cap companies in the Russell 2000 reflecting the overall bounce back of US equity markets following the COVID-19 recession in early 2020.”

Meme stock GameStop, with its market cap of $11.2 billion, will join the Russell 1000 Index, the large-cap index. AMC, with a $4.3 billion market cap, will not move up.

Thirty eight new issuers will join the Russell 2000, 21 of them in the health care sector. Five new IPOs will be added to the Russell 1000.

SEC Again Punts Decision on Bitcoin ETF

The cryptocurrency community has been awaiting a Bitcoin exchange traded fund for years, but they’ll have to wait even longer. This week, the Securities and Exchange Commission put out a request for public comment in response to Cboe’s request to list and trade VanEck’s Bitcoin ETF.

The filing asks questions about specific aspects of the Cboe proposal, such as whether the product would be susceptible to manipulation and whether the cryptocurrency landscape has changed since 2016.

The industry had high hopes that new SEC Chair Gary Gensler, who taught classes on cryptocurrencies, would be more receptive to a bitcoin ETF, according to Bloomberg. Republican Commissioner Hester Peirce, recently said the SEC was running out of excuses for not signing off on a Bitcoin ETF.

House Passes ESG Disclosure Legislation

This week the House of Representatives passed the Corporate Governance Improvement and Investor Protection Act, which would require publicly traded companies to disclose to shareholders certain environmental, social and governance metrics.

Under the regulation, the Securities and Exchange Commission would have to require issuers to disclose ESG metrics with audited financial statements. It would also create a Sustainable Financial Advisory Committee to submit recommendations to the SEC about what ESG metrics should be disclosed.

The news comes as the SEC is making ESG disclosure issues a priority. The SEC recently assembled a new enforcement task force focusing on ESG and climate-related issues, including how investment advisors are disclosing the details of strategies that tout sustainability. 

The SEC’s Division of Examinations also said examiners would be looking out for these issues at firms. But several commissioners questioned whether it would be better for other ESG-related reviews at the agency to conclude before moving forward.

OSAM Hires a New Portfolio Manager

O’Shaughnessy Asset Management, a quantitative money manager in Stamford, Conn., has added Claire Noel, former partner at AJO Partners, an institutional investment manager in Philadelphia, as a portfolio manager.

Noel will be responsible for conducting quantitative research, devising investment strategy, incorporating ESG considerations and overseeing portfolio rebalancing. She’ll report to Chris Meredith, co-chief investment officer of OSAM.

Over the last year, OSAM has been building out its custom indexing platform, Canvas. In February, OSAM announced that Canvas had reached more than $1 billion in AUM since launching a year prior. At the time, the firm said the platform had 580 client accounts across nine RIAs.

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