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Fair value adjusted index data introduced for Russell global indices

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Interactive Data’s pricing and reference data business will provide its fair value information service for international equities to Russell Investments for use in providing fair value adjusted information on Russell’s global equity indices.

This information is designed to help investment professionals effectively compare the performance of their international funds to benchmark indices by incorporating information that approximates the fund’s fair value procedures for international equity securities.

Russell’s fair value adjusted index data will be available in a monthly report to clients of Russell Investments and Interactive Data, as well as to the public via Russell Investments’ website.

An important component of fund performance measurement is the concept of tracking error, which estimates the standard deviation of the differences between a mutual fund’s returns versus those of a comparable benchmark index.

Generally, when comparing similar funds with identical returns, a fund with a lower tracking error is perceived to exhibit less risk.

A research report by Interactive Data revealed that comparing the performance of international mutual funds that employ fair valuation techniques for international equity securities with benchmark indices that do not include fair value adjustments can increase the fund’s perceived tracking error, which can be misleading.

By compiling index data utilizing Interactive Data’s FVIS evaluations, Russell can help investment professionals make a more “apples-to-apples” comparison of performance to a given benchmark.

Russell will initially provide fair value adjusted index data based on its equity indexes that reflect the following market segments: global, global large cap, global small cap, global ex-US, developed large cap, developed ex-North America large cap, developed Europe, Asia Pacific, Asia Pacific ex-Japan, emerging markets, global ex-frontier, and global ex-frontier large cap.

"Our top priority is to provide clients and end investors with the best possible measures of fund performance," says Susie Caswell, senior product manager for Russell indexes at Russell Investments. "By employing Interactive Data’s service on top of our truly reflective and modular index construction, we’ll serve those investment managers who use fair value adjusted pricing for their international funds with another way to examine returns. As the only index provider whose primary business is investment management, we understand the importance of accurate analysis of performance measurement."

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