SMALL CAP PERSPECTIVES - FTSE Russell · FTSE Russell | Small Cap Perspectives: ... June 30, 2017, outpaced only by the Russell Microcap Index’s impressive +27.6% return over the

RUSSELL 2000® INDEX QUARTERLY ANALYSIS

SMALL CAP PERSPECTIVES

June 2017

01FTSE Russell | Small Cap Perspectives: Russell 2000® Index Quarterly Analysis

Market Recap Commentary – Second Quarter 2017

1 Source: https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm2 Source: https://bea.gov/newsreleases/glance.htm3 See Exhibit 7.4 See Exhibit 1. 5 See Exhibit 2.

The US economy and The Fed The Federal Open Market Committee raised the target range of the federal funds rate a quarter point in both its March and June meetings, bringing the target to a range of 1.0% to 1.25%. This is in line with the Fed’s objective to gradually reduce an accommodating monetary policy to a more neutral stance. Another part of that plan is “balance sheet normalization,” which is Fed-speak for gradually reversing much of the aggressive asset buying it did during the financial crisis that came to be known as “quantitative easing.”¹

The Fed’s actions are based on an assessment of the US economy as growing at a “moderate” pace. The unemployment rate has fallen about ¼ percentage point to 4.4%

in June. Real GDP grew at an 1.2% annual rate in the first quarter, and according to the advance estimate released by the Bureau of Economic Analysis on July 28, 2017, second quarter results are expected to increase at an annual rate of 2.6%.

The Fed’s most closely watched inflation index is the Personal Consumption Expenditure Price Index excluding food and energy prices, also known as core inflation; it edged down to 1.4% year-over-year in May.2 This remains well below the Fed’s 2.0% target rate of inflation. The persistence of below-target inflation is an argument for keeping the pace of normalization very gradual, as any sharp upward moves in interest rates might slow down economic growth and push inflation even lower.

The market shift of the first half of 2017The first two quarters of 2017 saw a shift in the market along several dimensions compared to 2016. Last year, value outpaced growth and small cap outpaced large cap. So far in 2017, we have seen a reversal along both dimensions. The largest spread so far this year is with large cap growth exceeding small cap value by 13.5 percentage points year-to-date as of June 30.3 (The Russell Microcap® Index has been an exception to this shift, exceeding all other cap levels in the second quarter)4. In small caps, there has also been a shift from the risk-off “defensive” segment of the market to the more risk-on “dynamic” segment. The Russell 2000® Dynamic Index exceeded the Russell 2000 Defensive Index by 1.5 percentage points in the second quarter and 4.1 percentage points in the first quarter.5

There has been a shift in sector performance within small caps this year compared to 2016 as well. Some insight can be found by considering the impact of the US presidential election. Figure 1 shows Russell 2000 Index sector returns less the total return of the overall Russell 2000 Index (in other words, excess sector returns). The returns are ordered by highest to lowest in the period immediately after the presidential election to the end of 2016. We can see that Energy, Financial Services, Materials & Processing and Producer Durables all outperformed the benchmark. These four sectors are arguably the most sensitive to then President-elect Trump’s proposed economic agenda of lower corporate tax rates, less regulation and higher infrastructure spending. However, since the beginning of 2017 it has become increasingly clear to many market participants that the agenda will not be implemented as quickly or completely as many had at first thought. Note that all four of the sectors that outperformed to the end of 2016 have underperformed the benchmark in the first half of 2017. Also, note that the sectors that underperformed the most to the end of 2016 — Technology, Utilities and Health Care — have since outperformed in the first half of 2017. This suggests a reversal of the so-called “Trump Trade” that took off beginning November 9th. Figure 1: Excess returns of the Russell 2000 Index sectors since the presidential electionRussell 2000 Index Sectors Total Return - Russell 2000 Index Total Return (%)

-40

-30

-20

-10

0

10

20%

Health CareUtilitiesTechnologyConsumer Staples

ConsumerDiscretionary

Producer Durables

Materials & Processing

FinancialServices

Energy

January 1, 2017 to June 30, 2017November 8, 2016 to December 31, 2016

https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

https://bea.gov/newsreleases/glance.htm


But even if the “Trump Trade” has partially or wholly reversed, the small cap market has been buoyed up by something. A clue might be found in recent research on the small cap business cycle.6 If we identify a “trough” in the Russell 2000 Index as the bottom of a greater-than-20% correction, then the last trough was on February 11, 2016. From then to June 30, 2017 we have had 349 trading days without another major correction in the Russell 2000, with a total market return of 48.6%7 (Figure 2). Going back to 1978, the median number of trading days from a trough to the next peak is 698 days and the median return is 106.8%.8 So, based solely on history, the current expansionary phase of the Russell 2000 Index may only be about half way through a typical small cap cycle.

Market takeaways for the first half of 2017

The shift occurring in the growth and risk-on dynamic styles are the headline takeaways for the first half of 2017. The outperformance of large cap over small cap in the first half of 2017 is also notable, as evidence of a reversal of the “Trump Trade.” The Russell US Indexes have captured the tone of the market for over 30 years. Whether market participants prefer a risk-on or risk-off environment, or whether they favor growth stocks over value (or vice a versa), the indexes provide the tools needed to make informed investment decisions.

Figure 2: Russell 2000 Index PerformanceIndex levels (in 100s) through 6/30/2017

8.2

8.3

8.4

8.5

8.6

8.7

8.8

8.9

349 Trading Days48.6% Return

Since the last trough

Trough

November 8

2/29/2

0163/3

1/2016

12/31/2

0151/3

1/2016

4/30/2

0165/3

1/2016

6/30/2

0167/3

1/2016

8/31/2

0169/3

0/2016

10/31/2

01611/3

0/2016

12/31/2

0161/3

1/2017

2/28/2

0173/3

1/2017

4/30/2

0175/3

1/2017

6/30/2

017

Source: FTSE Russell, data as of June 30, 2017. Past performance is no guarantee of future results. Please see important legal disclosures at the end of this report.

Market Recap Commentary(continued)

6 Goodwin (2017), “The Trump Trade and the Small Cap Cycle,” FTSE Russell Blog, http://www.ftserussell.com/blog/trump-trade-and-small-cap-cycle7 This not to be confused with the “peaks” and “troughs” of Exhibit 5, which are based on the business cycle.8 Source: FTSE Russell. Data from [month] 1978 to June 30, 2017. Past performance is no guarantee of future results. Returns may reflect hypothetical historical performance. Please see the end for important legal disclosures.


Size • Positive performance trends continued into the second quarter of the year for

all Russell US Indexes (Exh 1). After posting the weakest result during the first quarter of 2017, the Russell Microcap Index boasted the highest second quarter gain with its +3.83% return followed closely by the Russell 2500 Index, which returned +3.76% (both rounded to +3.8% in Exhibit 1).

• The Russell 2000 Index recorded the lowest result of the quarter (+2.5%), but still ranked as the second highest performer for the twelve-month period ending June 30, 2017, outpaced only by the Russell Microcap Index’s impressive +27.6% return over the same period.

Style • Growth outperformed value in both the large and small cap market segments

(Exh 2) during the first quarter of the year, boosting the year-to-date results of the Russell 1000 Growth and Russell 2000 Growth Indexes to outpace their value counterparts by margins of 9-10 percentage points.

• Also echoing first quarter results, dynamic outperformed defensive in both the large and small cap segments in the second quarter of 2017 (Exh 2).

FTSE Russell considers style along three dimensions: size, valuation and stability. The size dimension includes large cap and small cap as defined by market capitalization. Valuation includes growth and value measures. Stability provides a risk dimension to style by assessing a variety of factors related to quality and volatility exposures. Stability includes dynamic (companies with greater economic sensitivity and more variable earnings profiles) and defensive (companies with less economic sensitivity and more stable earnings profiles). For more information on Russell’s style definitions, please refer to the complete methodology document: Russell US Equity Indexes available at ftserussell.com.

Exhibit 1: Market Cap Segment PerformanceTotal Return (%) (as of 06/30/2017)

20172nd qtr

20171st qtr

2016 4th qtr

2016 3rd qtr

YTD as of

06/30/2017

12 Mos as of

06/30/2017

Russell 2500 Index 3.8 6.1 6.6 3.6 6.0 19.8

Russell Microcap® Index 3.8 0.4 10.0 11.3 4.2 27.6

Russell Top 200® Index 3.2 6.4 4.1 3.8 9.8 18.7

Russell 1000® Index 3.1 6.0 3.8 4.0 9.3 18.0

Russell 3000® Index 3.0 5.7 4.2 4.4 8.9 18.5

Russell Midcap® Index 2.7 5.1 3.2 4.5 4.2 16.5

Russell 2000® Index 2.5 2.5 8.8 9.0 5.0 24.6

Exhibit 2: Style PerformanceTotal Return (%) (as of 06/30/2017)

20172nd qtr

20171st qtr

2016 4th qtr

2016 3rd qtr

YTD as of

06/30/2017

12 Mos as of

06/30/2017

Russell 1000 Growth Index 4.7 8.9 1.0 4.6 14.0 20.4

Russell 1000 Value Index 1.3 3.3 6.7 3.5 4.7 15.5

Russell 2000 Growth Index 4.4 5.3 3.6 9.2 10.0 24.4

Russell 2000 Value Index 0.7 -0.1 14.1 8.9 0.5 24.9

Russell 1000 Defensive Index 2.7 5.6 2.2 0.6 8.4 11.4

Russell 1000 Dynamic Index 3.5 6.5 5.4 7.6 10.2 24.9

Russell 2000 Defensive Index 1.8 0.5 13.2 5.3 2.2 21.8

Russell 2000 Dynamic Index 3.2 4.6 4.6 12.9 7.9 27.5


Market performance


Small cap performance analysis

• After an impressive 2016 total return of +21.3%, the Russell 2000 Index is on the right track toward another strong calendar year, with a year-to-date return of +5.0% as of June 30, 2017. Of the 64 trading days in the quarter, the index had more up days (34) than down (29) (Exh 4).

• June 13, 2017 marked another record high value for the Russell 2000 Index. Record high values were also achieved in March and April of this year (Exh 5). As of June 30, 2017 the Russell 2000 Index had advanced +312.3% on a cumulative basis since the financial crisis trough on March 9, 2009 (Exh 5).

• Comparing the second and first quarter performance of the Russell 2000 Index to that of the Russell 1000 Index, large cap has outpaced small cap. Over the course of the twelve-month period ending June 30, 2017, however, the Russell 2000 Index outperformed the Russell 1000 Index by over 5 percentage points with its +24.6% total return (Exh 6).

%

RUSSELL 2000 INDEX RUSSELL 1000 INDEX

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

-60

-40

-20

020

40

60

80

1000

2000

3000

4000

5000

6000

7000

Total ReturnTrough to Present

03/09/2009–06/30/2017 +362.5%

Total ReturnPre Recession Peak to Peak

07/13/2007–06/13/2017+91.4%

Dec

-07

Jun-

08

Dec

-06

Jun-

07

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

Jun-

15

Dec

-15

Jun-

16

Dec

-16

Jun-

17

Exhibit 3: 12-Month Rolling ReturnsTotal Return (%) – 10 Years (as of 06/30/2017)

2017 Annualized Calendar Year

2nd Qtr YTD 1 Yr 3 Yr 5 Yr 10 Yr 2012 2013 2014 2015 2016

Russell 2000 Index 2.5 5.0 24.6 7.4 13.7 6.9 16.4 38.8 4.9 -4.4 21.3

Russell 1000 Index 3.1 9.3 18.0 9.3 14.7 7.3 16.4 33.1 13.2 0.9 12.1

Exhibit 6: PerformanceTotal Return (%) (as of June 30, 2017)

Exhibit 5: Russell 2000 Index PerformanceTotal Return (January 2007 – June 2017)


3000350040004500500055006000650070007500

Mar

-13

Jan-

17

Sep

-14

Dec

-14

Jun-

14

Mar

-14

Jan-

14

Sep

-15

Dec

-15

Jun-

15

Mar

-15

Jan-

15

Sep

-16

Dec

-16

Jun-

16

Jun-

17

Mar

-16

Jan-

16

Dec

-13

Jan-

13

Sep

-13

2013+38.8%

2014+4.9%

2015-4.4%

201621.3%

YTD20175.0%

Jun-

13

Mar

-17

Exhibit 4: Russell 2000 Index PerformanceTotal Return (January 2013 – June 2017)


Relative returns analysis

• Exhibits 7 and 9 display the 2017 year-to-date and the 2014-2016 calendar year total returns of the indexes that represent the size and style segments of the US market. Continuing the trend that began during the first quarter of this year, growth is outpacing value across large, mid and small cap indexes as of June 30, 2017.

• Comparing growth and value performance across the large, mid and small cap indexes, on the growth side, the year-to-date Russell 1000 Growth Index returns are higher that the returns of its mid and small cap counterparts. On the value end of the spectrum, the Russell Midcap Value Index has had the strongest year thus far as compared to the Russell 1000 Value and Russell 2000 Value Indexes.

• Exhibit 8 compares the 10-year growth of the Russell 2000 Index to that of the Russell 1000 Index. The small cap index’s strong 2016 helped to temporarily narrow the distance between the two, but with large cap outperforming small cap so far in 2017, the performance differential is reversing course.


Exhibit 9: Russell Index Style PerformanceTotal Return (%) (as of 06/30/2017)

Index 2017 YTD 2016 2015 2014

Russell 1000 Growth Index 14.0 7.1 5.7 13.1

Russell Midcap Growth Index 11.4 7.3 -0.2 11.9

Russell 2000 Growth Index 10.0 11.3 -1.4 5.6

Russell 1000 Index 9.3 12.1 0.9 13.2

Russell Midcap Index 8.0 13.8 -2.4 13.2

Russell Midcap Value Index 5.2 20.0 -4.8 14.8

Russell 2000 Index 5.0 21.3 -4.4 4.9

Russell 1000 Value Index 4.7 17.3 -3.8 13.5

Russell 2000 Value Index 0.5 31.7 -7.5 4.2


0

50

100

150

200

250

Jun-07 Jun-13 Jun-15 Jun-17Jun-11Jun-09

Exhibit 8: Index Performance — Growth of a unitIndex levels (in 100s) — 10 years as of 6/30/2017

Exhibit 7: Russell Style Index PerformanceTotal Return (%) (as of 06/30/2017)

2017 YTD

Value Core Growth

Large 4.7 9.3 14.0

Mid 5.2 8.0 11.4

Small 0.5 5.0 10.0

2016

Value Core Growth

Large 17.3 12.1 7.1

Mid 20.0 13.8 7.3

Small 31.7 21.3 11.3

2014

Value Core Growth

Large 13.5 13.2 13.1

Mid 14.8 13.2 11.9

Small 0.5 4.9 5.6

2015

Value Core Growth

Large -3.8 0.9 5.7

Mid -4.8 -2.4 -0.2

Small -7.5 -4.4 -1.4


Volatility and risk metrics • The CBOE Russell 2000 Volatility IndexSM (RVXSM) measures the expected

volatility implied by option prices for the Russell 2000 Index. The RVX reached its Q2 high of 20.1 on April 12 (Exh 10) and then spent the rest of the quarter steadily drifting and settling into a range between 13.9 and 16.1 (with the exception of a three-day spike mid-May during which the index rose to 19.2). Notably, the quarter’s deepest dive to 13.9, which occurred on June 19th, is the lowest index level we’ve seen since March of 2013. Volatility remains low compared to the 10-year average of 26.0.

• Exhibit 11 displays the daily returns of the Russell 2000 Index. The highest Q2 daily return of 1.9% occurred on June 1, while the largest dip occurred on May 17 (-2.8%).

• During the second quarter of 2017, the 12-month rolling standard deviation of the Russell 2000 Index and the Russell 1000 Index (Exh 12) show the volatility of both indexes continuing along the downward trajectory observed over the last twelve months. Both experienced a slight uptick in June but still closed the quarter with figures below those recorded as of the end of the first quarter. The Russell 2000 Index remains well below its 10-year average of 24.0%.

Exhibit 10: Implied VolatilityCBOE Russell 2000 Volatility Index (RVX) — 10 Years (as of 06/30/2017)

Exhibit 11: Russell 2000 Index Daily ReturnsTotal Return (%) — 20 Years (as of 06/30/2017)

Standard Deviation (%) Return/Risk Ratio

1 Yr 3 Yr 5 Yr 10 Yr 1 Yr 3 Yr 5 Yr 10 Yr

Russell 2000 Index 15.2 16.7 16.1 26.4 1.5 0.4 0.8 0.3

Russell 1000 Index 9.5 13.1 12.4 21.0 1.7 0.7 1.2 0.3

Exhibit 13: Risk Characteristics Annualized (as of 06/30/2017)

Exhibit 12: 12-Month Rolling Standard Deviation (%)10 Years (as of 06/30/2017)

-15

-10

-5

0

5

10

15

2016201520142013201220112009200820072006200520042003200220012000199919981997 2017

9.3

-11.8

%


0

10

20

30

40

50

60

Jun-07 Jun-16Jun-15Jun-14

Russell 2000 Index10 Yr Avg+24.0%

Jun-13Jun-12Jun-11Jun-10Jun-09Jun-08 Jun-17

Source: CBOE. CBOE®, Chicago Board Options Exchange®, CBOE Volatility Index®, and VIX® are registered trademarks of Chicago Board Options Exchange, Incorporated (CBOE). RVX is a service mark of CBOE. The Russell 2000 Index is a registered trademark of The Frank Russell Company, used under license. This data is believed to be correct but CBOE does not guarantee the accuracy of the data and will not be held liable for consequences of its use.


010203040

90

RVX

Inde

x Va

lue

80706050

100

Jun-07 Jun-08 Jun-17Jun-15Jun-13Jun-11Jun-09 Jun-10 Jun-12 Jun-14 Jun-16

10 YrAverage

26.0


Small cap asset flows

• For the third consecutive quarter, the total AUM in ETFs and Mutual Funds tracking small cap indexes reached a record high. Up over $6 Billion from the first quarter of 2017, assets totaled $724 Billion as of June 30, 2017 (Exh 14).

• Exhibit 15 displays monthly flows of assets into small cap products, distinguishing between ETFs and Mutual Funds. May 2017 marked the first outflow of ETF assets since May 2016 (not shown). All three months of the second quarter of 2017 saw outflows from Mutual Funds.

Exhibit 14: Quarterly Small Cap Total Assets ($ Billions)10 Years (As of 06/30/2017)

Exhibit 15: Monthly Small Cap Asset Flows ($ Billions)Estimated Net Flows — One Year (as of 06/30/2017)

Exhibit 16: Monthly Small Cap Asset Flows ($ Billions)Estimated Net Flows — One Year (as of 06/30/2017)

Source: Morningstar Direct. Total assets and estimated net flows are for all U.S.-domiciled open-end mutual funds (excluding money market funds and funds-of-funds) and Exchange Traded Products (ETPs) categorized as small cap, small cap growth or small cap value by Morningstar.

$

Jun-07 Jun-17Jun-16Jun-15Jun-14Jun-13Jun-12Jun-11Jun-10Jun-09Jun-08

Bill

ions

0

100

200

300

400

500

600

700

800

-4

-6

2

0

-2

4

6

8

10

12

$

Jul-16 Jun-17May-17Apr-17Mar-17Feb-17Jan-17Dec-16Nov-16Oct-16Sep-16Aug-16

Bill

ions

Total Small Cap MF Flow Total Small Cap ETF Flows

-7

10

-1

-3

-5

3

5

7

9

11

$

Jul-16 Jun-17May-17Apr-17Mar-17Feb-17Jan-17Dec-16Nov-16Oct-16Sep-16Aug-16

Bill

ions




Russell 2000 Index sector weights

• The Russell 2000 Index sector weights remained relatively flat as compared to the end of last quarter. Financial Services (Exh 17) is the sector most heavily represented in the index with a weight of 26.3%, followed by Health Care (14.9%) and Technology (14.1%).

• The largest increase occurred in the Health Care sector, which grew from 12.1% to 13.0% of the index weight (Exh 18), boosted in part by its 12.5% total return for the quarter (Exh 22). The largest decrease in weight as compared to last quarter occurred in Financial Services, where we saw its representation in the index shift from 28.4% to 27.8%.

Jun-17Jun-16Jun-15Jun-14Jun-13Jun-12Jun-11Jun-10Jun-09Jun-08Jun-070

10

20

30

40

50

60

70

80

90

100%

Energy

FinancialServices

Consumer Discretionary

Materials &Processing

Producer Durables

Health Care

Utilities

Technology

Consumer Staples

Exhibit 18: Historical Sector Weightings (%)10 Years (as of 06/30/2017)

Exhibit 17: Current Sector Weightings (%)as of 06/30/2017

2.4%3.5%4.8%

7.1%

13.5%

13.5%

14.1%

14.9%

26.3%


Financial Services

Utilities

Energy

Health Care

Technology

Producer Durables


Consumer Staples



Russell 2000 Index sector attribution analysis • Sector performance during the second quarter of 2017 ranged from Health

Care’s gain of +9.0% to Energy’s -17.8% loss (Exh 22).

• Shown in Exhibit 19, Health Care made the largest positive contribution (+1.1%) to the quarterly return of the Russell 2000 Index, followed by Technology (+0.7%) and Producer Durables (+0.5%). Not surprisingly given its double digit negative return for the quarter, the Energy sector, which has been impacted by low oil prices, was the biggest drag on the performance of the index (-0.5%).

• Exhibit 20 provides a more granular view of what contributed to the overall performance of the Russell 2000 Index by listing the industries with the largest positive contribution to the index’s quarterly return. Computer Services, Software & Systems had the largest impact, followed by Biotechnology, Medical & Dental Instruments & Supplies, Health Care Services, and Electronic Components.

• Exhibit 21 lists the industries with the largest negative impact. Oil: Crude Producers and Oil Well Equipment & Services had the most significant impact, followed by Specialty Retail, Retail REITs and Radio & TV Broadcasters.

Exhibit 19: Sector Contribution to Return (%)Second Quarter 2017 (as of 06/30/2017)

Exhibit 20: Top Industry Contributors (%)Second Quarter 2017 (as of 06/30/2017)

Exhibit 21: Bottom Industry Contributors (%)Biggest detractors – Second Quarter 2017 (as of 06/30/2017)

-1.0

-0.5

0.0

0.5

1.0

1.5

%

HealthCare

Technology ProducerDurables

FinancialServices

ConsumerDiscretionary

Utilities ConsumerStaples

Materials &Processing

Energy

Financial Services

Health Care

TechnologyProducer Durables



Utilities EnergyConsumer

Staples

Russell 2000 Index Weight (%) 26.3% 14.9% 14.1% 13.5% 13.5% 7.1% 4.8% 3.5% 2.4%

Total Return (%) 1.5 9.0 4.0 3.6 2.3 -1.4 4.5 -17.8 -2.8

Contribution to Return (%) 0.4 1.1 0.7 0.5 0.3 -0.1 0.2 -0.5 -0.1

Exhibit 22: Sector ReviewSecond Quarter 2017 (as of 06/30/2017)

Computer ServicesSoftware & Systems

ElectronicComponents

HealthCare Services

Biotechnology Medical & DentalInstruments & Supplies

0.0

0.1

0.2

0.3

0.4

0.5%

Oil: CrudeProducers

Radio & TVBroadcasters

Equity REIT:Retail

Oil Well Equipment& Services

SpecialtyRetail

-0.4

-0.3

-0.2

-0.1

0.0%

Source: FTSE Russell, data asof June 30, 2017. Past performance is no guarantee of future results. Please see important legal disclosures at the end of this report.


Russell 2000 Index fundamental characteristics • With the exception of a slight dip in May, the price-to-earnings ratio (P/E) of

the Russell 2000 Index continued on the incline it had began at the beginning of 2017, closing the second quarter of the year at 27.1, up from its March 31, 2017 score of 25.5 (Exh 23). The I/B/E/S one-year forecasted P/E as of June 30, 2017 was 27.1 (Exh 26).

• For the Russell 2000 Index, profitability, as measured by five-year return on assets (ROA) average, had lingered within the 4.18% to 4.42% range over the last year until June 30, 2017 when it dipped blow 4.0% (Exh 24). In comparison, the five-year ROA average of the Russell 1000 Index as of the end of the quarter was nearly 6 percentage points higher at 9.4% (Exh 26).

• Five-year forecasted earnings growth for companies in the Russell 2000 Index remained in the range of 7.1% to 7.3% this quarter after the late 2016 drop to 6.9% (Exh 25).

Exhibit 23: Price-to-earnings Ratio (P/E)I/B/E/S 1-year forecasted — Last 12 months as of 06/30/2017

Exhibit 24: Return on Assets (ROA)Trailing 5 Years (%) — Last 12 months as of 06/30/2017

Exhibit 25: Earnings GrowthI/B/E/S 5-year forecasted EPS — Last 12 months as of 06/30/2017

20May-17Apr-17Mar-17Feb-17Jan-17Dec-16Nov-16Oct-16Sep-16Aug-16

25.3

26.0 26.4

Jul-16 Jun-17

22

24

26

28

30

25.3

28.829.4

24.525.0

25.525.9 25.6

27.1

Valuation Growth Quality

P/E - I/B/E/S 1 Yr Forecasted

Price/Book Price/Cash FlowSales per Share Growth

- 5 YrLong Term Forecasted

Growth - I/B/E/S MedianROA - 5 Yr Avg Debt/Equity Dividend Yield

Russell 2000 Index 27.1 2.3 11.8 4.8 7.2 3.9 0.7 1.3

Russell 1000 Index 18.2 3.1 12.4 5.5 10.3 9.4 0.9 1.9

Exhibit 26: Fundamental CharacteristicsMarket Snapshot (as of 06/30/2017)

3.5May-17Apr-17Mar-17Feb-17Jan-17Dec-16Nov-16Oct-16Sep-16Aug-16

4.42 4.404.30

4.234.35

4.23 4.20 4.18 4.19 4.194.31

3.91

Jul-16 Jun-17

4.0

4.5

5.0

4May-17Apr-17Mar-17Feb-17Jan-17Dec-16Nov-16Oct-16Sep-16Aug-16

7.55 7.59 7.79 7.70

7.05 6.90 6.99 7.08 7.30 7.20 7.30 7.17

Jul-16 Jun-17

6

8

10



Disclaimer© 2017 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE TMX Global Debt Capital Markets Inc. and FTSE TMX Global Debt Capital Markets Limited (together, “FTSE TMX”) and (4) MTSNext Limited (“MTSNext”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE TMX and MTS Next Limited. “FTSE®”, “Russell®”, “FTSE Russell®” “MTS®”, “FTSE TMX®”, “FTSE4Good®” and “ICB®” and all other trademarks and service marks used herein (whether registered or unregistered) are trade marks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, MTSNext, or FTSE TMX.

All information is provided for information purposes only. Every effort is made to ensure that all information given in this publication is accurate, but no responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for any errors or for any loss from use of this publication or any of the information or data contained herein.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of FTSE Russell indexes or the fitness or suitability of the indexes for any particular purpose to which they might be put.

No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group index data and the use of their data to create financial products require a licence from FTSE, Russell, FTSE TMX, MTSNext and/or their respective licensors.

Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back- tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.

This publication may contain forward-looking statements. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. Any forward-looking statements speak only as of the date they are made and no member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking statements.

Morningstar is the copyright owner of the Morningstar information used by FTSE Russell to calculate the data included in this presentation. All rights reserved 2017. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.


FTSE Russell is a leading global index provider creating and managing a wide range of indexes, data and analytic solutions to meet client needs across asset classes, style and strategies. Covering 98% of the investable market, FTSE Russell indexes offer a true picture of global markets, combined with the specialist knowledge gained from developing local benchmarks around the world.

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. $12.5 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create investment funds, ETFs, structured products and index-based derivatives. FTSE Russell indexes also provide clients with tools for asset allocation, investment strategy analysis and risk management.

A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on index innovation and customer partnership applying the highest industry standards and embracing the IOSCO Principles. FTSE Russell is wholly owned by London Stock Exchange Group.

For more information, visit ftserussell.com.

To learn more, visit ftserussell.com; email [email protected]; or call your regional Client Service Team office:

EMEA+44 (0) 20 7866 1810

North America+1 877 503 6437

Asia-PacificHong Kong +852 2164 3333Tokyo +81 3 3581 2764Sydney +61 (0) 2 8823 3521

About FTSE Russell

ftserussell.com

www.ftserussell.com

mailto:info%40ftserussell.com?subject=

Documents

SMALL CAP PERSPECTIVES - FTSE Russell · FTSE Russell | Small Cap Perspectives: ... June 30, 2017, outpaced only by the Russell Microcap Index’s impressive +27.6% return over the