The UK has always been at the forefront of financial innovation, bringing companies and investors from around the world together to raise and invest capital efficiently.
And much of this financial innovation over the last two plus decades has occurred among UK-based companies residing in the mid-cap sector.
This is why 25 years ago we sought to identify and measure, for the first time, UK mid-caps as part of the opportunity set for global investors. As a result, the FTSE 250 Index was born. With a combined market capitalisation of just under £100bn in 1992, today’s constituents have more than quadrupled in value to over £450bn.
Like most financial innovation, the FTSE 250 was born out of customer demand. Some commentators were initially sceptical, but the UK mid-cap sector is now a key part of the UK’s financial ecosystem – and the FTSE 250 has reflected this.
As we mark its twenty-fifth anniversary, the index also shines a light on the evolution of the backbone of the British economy.
Just over half of the revenues now earned by constituent firms come from overseas – demonstrating how UK mid-caps are increasingly looking outwards and becoming more capable of supporting export driven economic growth. The FTSE 100 has long been a benchmark for major global firms listed in the UK, and the FTSE 250 is now widely seen as a barometer of successful, established and growing UK companies – who themselves are becoming increasingly global.
Reflecting the global transition to a low carbon economy, green revenues now contribute to the income of a fifth of FTSE 250 constituents. In fact, sustainable investing is rapidly growing in importance for all investors and listed companies.
Last month, for example, Japan’s Government Pension Investment Fund, the world’s largest government pension fund with over $1.3 trillion in assets, selected one of our indices as a core Environmental, Social and Governance (ESG) benchmark as they integrate sustainability considerations into their investment strategies.
Through innovations like the FTSE 250, along with data and analytics, we are helping investors to make better investment decisions and flows into passive funds are reducing costs for all. The consequent improved market liquidity provides constituent firms with increased access to long term capital, allowing them to innovate, grow and create jobs.
Just as deep and liquid capital markets reduce the cost of investment capital, and global clearing liquidity pools cut the cost of regulatory capital, our global benchmarks also work to make markets more transparent and efficient
The growth and success of the British economy over the last 25 years has been driven in large part by UK mid-cap companies. Companies in this segment have embraced innovative new strategies and fostered a global outlook – all important drivers of growth.
When I founded the business in the 1990s, like many of the companies that have become FTSE 250 firms, we were a startup, employing just nine people. Today, FTSE Russell has over $15 trillion in assets under management tracking our global benchmarks – more than any other index provider in the world – all thanks to the customer-focused, innovative spirit that spawned the FTSE 250.
Many of the firms listed on the FTSE 250 will be essential to our future economic success. Both domestic names and global powerhouses alike will continue on the same prosperous trajectory. Here’s to the next 25 years.