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Reconstitution of Russell Indices 2020

Every year FTSE Russell creates a family of indexes, called the Russell 1000, 2000, and 3000 indexes that consist of the largest 1000, 2000, and 3000 US public companies by market capitalization. With the annual Russell reconstitution in June, new tickers were added to the Russell 3000 as part of Axiomatic’s monthly data processes.
axiomatic russell reconstitution 2020

Key Findings:

  • While technology companies dominated the large-cap index, the highest percentage of new entrants in Russell 3000 in 2020 belonged primarily to the Professional and Scientific.

  • On the other hand, not surprisingly (post COVID-19), there were five companies belonging to the Accommodation and Food Services industry that exited the Russell 3000, but none within that industry entered the Russell.

  • Companies exiting the Russell were more likely to have a legacy defined-benefit plan, leading to additional financial pressue on these bigger companies wih under-funded defined benefit plans (see http://www.axiomaticdata.com/blogPosts/covid-19-effect-on-defined-benefit-plans).

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Axiomatic Data Announces the Launch of Finder

New tool allows users to identify, screen, and compare US companies based on employee benefit plans.
finder release

Key Features:

  • Search across over 700,000 public and private US companies.
  • Compare companies across key employee benefit metrics.
  • Graph comparisons on screen.
  • Download data for further analysis.

Download the full press release here.

Pension Contributions & Financial Performance

Our first white paper provides evidence of the correlation between corporate pension fund contribution and financial performance.
whitepaper-1

Key Findings:

  • Statistically significant correlations were found between contributions to defined contribution pension plans and corporate financial performance for Russell 3000 companies.

  • Employer contributions were found to be more correlated with financial performance than participant contributions, consistent with findings from a research paper by T. Rowe Price.

  • Companies with higher contributions per employee were found to be more likely to have higher revenue and EBITDA per employee, accounting for company size, age, and industry.

  • Above findings were found to hold for all industry sectors, except Professional, Scientific and Technical Services, which has little correlation between EBITDA and pension contributions per employee.

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COVID-19 effect on defined benefit plans

Our new white paper covers the impact of COVID-19 on defined benefit plans in the Russell 3000 from information gleaned from Form 5500 filings.
whitepaper-2

Key Findings:

  • Current economic downturn and likely cut in stock dividends caused by the COVID-19 pandemic could lead to financial pressure on companies with under-funded defined-benefit plans.

  • Approximately 27% of companies in the Russell 3000 still have a defined-benefit pension plan.

  • Companies with a high target normal cost and a high concentration of active defined-benefit

  • plan participants will have additional liability in the form of future company contributions.

  • Companies in the air transportation and retail industries that are historically vulnerable to plan failures and low funding ratios have a more significant problem during the current market downurn with “at-risk” underfunded defined-benefit plans.

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