When we launched the FTSE 250 25 years ago, we sought to identify and measure UK mid-cap companies for the first time.
The resulting index became part of the FTSE UK Index Series, which also includes the FTSE 100, the leading measure of blue-chip firms in the UK, along with the FTSE All-Share index. The FTSE UK Index Series is designed to represent the performance of eligible companies listed on London Stock Exchange, providing market participants with a comprehensive and complementary set of indexes that measure the performance of all segments of the UK equity market.
Firms from Yorkshire are well represented in the FTSE 250, with household names such as Card Factory, Drax Group and CYBG, the owner of the Yorkshire Bank, employing thousands in the region, and contributing to the local, and broader, economy.
The same can be said of almost all regions of the UK, which is why the index is widely acknowledged as a true reflection of the British economy.
The makeup of the FTSE 250 and the way the companies that are part of it derive their revenues tells us an important story about British plc. Just over half of the revenues now earned by constituent firms come from overseas – demonstrating how UK mid-caps are increasingly capable of supporting export driven economic growth.
As we mark its twenty-fifth anniversary, the index also gives us valuable insight into the evolution of investment trends. Sustainable investment and the global transition to a low carbon economy is rapidly growing in importance and this is reflected by the operations of constituents of the FTSE 250, with green revenues now contributing to
the income of a fifth of firms included in the index.
Without fanfare, large volumes of capital are being shifted into sustainable strategies that incorporate Environmental Social and Governance (ESG) considerations. Last November, for instance, HSBC announced that its corporate pension scheme had switched its default equity fund to a strategy that incorporated three climate change ‘tilts’, underweighting companies with high relative carbon emissions and fossil fuel assets, and with higher exposure towards those with revenues from green industries.
HSBC has now moved £4bn of pension assets into a fund run by Legal and General Investment Management that tracks this innovative FTSE Russell index approach. Moves of this sort by large pension funds are significant and are directly influencing corporate behaviour.
The growth and success of the British economy over the last 25 years has been driven in large part by UK mid-cap companies. These companies have continually innovated, created jobs and fostered a global outlook – all important drivers of growth.
When I founded FTSE in the 1990s, I never imagined it would grow into the powerhouse it is today. We began life as a start up with just nine members of staff and a vision to create products for customers that would make investing easier and more affordable. Today, FTSE Russell has over $15 trillion in assets under management tracking our global benchmarks – more than any other index provider in the world – thanks to the innovative spirit that led to the creation of the FTSE 250.
Many of the firms listed on London Stock Exchange and included in the FTSE 250 will of key importance to the future economic success of the UK. Here’s to the next 25 years.