FTSE Fledgling

FTSE Fledgling is a stock market index within the FTSE UK Index Series that represents companies eligible for inclusion in the FTSE UK Index Series but too small to qualify for inclusion in the FTSE All-Share Index. It is calculated and maintained by FTSE Russell, part of the London Stock Exchange Group (LSEG).

The FTSE Fledgling therefore represents a segment of smaller UK-listed companies below the size threshold required for inclusion in the FTSE All-Share. Unlike the FTSE All-Share, the FTSE Fledgling does not have a liquidity requirement for constituents.

Position within the FTSE UK Index Series

The FTSE UK equity-index structure can be broadly represented as:

$\text{FTSE All-Share}=\text{FTSE 100}+\text{FTSE 250}+\text{FTSE SmallCap}$

The FTSE Fledgling consists of eligible companies that are too small to be included in the FTSE All-Share.

The FTSE All-Share and FTSE Fledgling together form the basis of the broader FTSE All-Small universe:

$\text{FTSE All-Small}=\text{FTSE SmallCap}+\text{FTSE Fledgling}$

FTSE Russell's ground rules define the FTSE All-Small as comprising all companies in the FTSE SmallCap and FTSE Fledgling indices.

Composition

The FTSE Fledgling consists of companies that:

• are eligible for inclusion in the FTSE UK Index Series;
• are too small to qualify for the FTSE All-Share;
• satisfy the applicable eligibility requirements of the FTSE UK Index Series.

The index therefore sits below the FTSE SmallCap in the UK equity-market index structure.

Market capitalization

Market capitalization is generally calculated as:

$\text{Market Capitalization}=\text{Share Price}\times \text{Shares Outstanding}$

The FTSE UK Index Series applies additional rules relating to investability, free float, nationality, listing, and other eligibility factors.

For FTSE Fledgling constituents, the relevant size test determines whether a company is sufficiently large to enter the FTSE All-Share.

FTSE Fledgling and FTSE All-Share

The principal distinction between the two indices is company size.

The FTSE All-Share contains eligible companies large enough to meet its minimum size requirements, while the FTSE Fledgling contains eligible companies that fall below that threshold.

A simplified representation is:

$\text{FTSE Fledgling}=\text{Eligible Companies}-\text{Companies Large Enough for FTSE All-Share}$

The two indices should therefore not be treated as interchangeable.

FTSE SmallCap and FTSE Fledgling

The FTSE SmallCap represents the smaller-capitalisation companies included within the FTSE All-Share.

The FTSE Fledgling represents companies that are smaller still and therefore fall outside the FTSE All-Share.

The relationship can be represented as:

$\text{FTSE All-Small}=\text{FTSE SmallCap}+\text{FTSE Fledgling}$

This makes the FTSE Fledgling the smaller segment of the FTSE All-Small universe.

Liquidity

Unlike the FTSE All-Share, the FTSE Fledgling has no liquidity requirement for its constituents.

This distinction means that the index can contain companies whose shares may be less actively traded than securities included in the FTSE All-Share.

The absence of a liquidity requirement does not mean that all FTSE Fledgling constituents are illiquid; rather, liquidity is not used as a mandatory eligibility screen in the same manner as for the FTSE All-Share.

Index weighting

The FTSE Fledgling uses the FTSE UK Index Series methodology for determining constituent weights.

A simplified market-capitalisation-weighted representation is:

$\text{Index Weight}=\frac{\text{Adjusted Market Capitalization of Constituent}}{\text{Total Adjusted Market Capitalization of Index}}\times 100\mathrm{\%}$

The methodology incorporates applicable investability adjustments.

Free float

Free float refers broadly to the proportion of a company's shares considered available to public investors.

A simplified calculation of free-float-adjusted market capitalization is:

$\text{Free-Float-Adjusted Market Capitalization}=\text{Market Capitalization}\times \text{Free Float Factor}$

The FTSE UK Index Series applies detailed rules governing free-float restrictions and investability weightings.

Index reviews

The FTSE Fledgling is maintained through the FTSE UK Index Series review process.

At the quarterly reviews in September, December, and March, companies whose full market capitalization exceeds the applicable threshold may be considered for addition to the FTSE All-Share, provided they satisfy the relevant liquidity criteria.

Companies can therefore move from the FTSE Fledgling into the FTSE All-Share when their market capitalization increases sufficiently and they meet the applicable eligibility requirements.

Movement into the FTSE All-Share

A FTSE Fledgling constituent can become eligible for the FTSE All-Share when its size increases above the relevant threshold.

The FTSE UK Index Series ground rules specify a threshold based on the company's full market capitalization relative to the full market capitalization of the FTSE SmallCap. At the September, December, and March quarterly reviews, a company exceeding 0.20% of the full market capitalization of the FTSE SmallCap can be added to the FTSE All-Share if it meets the applicable liquidity criteria.

The threshold and other eligibility rules are subject to the FTSE UK Index Series methodology in force at the relevant review.

Index calculation

A simplified index calculation can be represented as:

$\text{Index Value}=\frac{\sum _{i=1}^n{\text{Adjusted Market Capitalization}}_i}{\text{Index Divisor}}$

The divisor is adjusted for relevant corporate actions and other changes to maintain continuity in the index.

Price and total-return indices

The FTSE Fledgling can be calculated using different return methodologies.

A price index measures changes in the prices of its constituents.

A total-return index incorporates dividend income according to the applicable methodology.

A simplified relationship is:

$\text{Total Return}=\text{Capital Return}+\text{Dividend Return}$

The precise treatment of dividends depends on the specific index variant.

Investment products

FTSE Fledgling can serve as a benchmark or underlying reference for investment products and strategies.

Potential applications include:

• index funds;
• exchange-traded funds (ETFs);
• derivatives;
• structured products;
• performance benchmarks.

The index is designed for use as a performance benchmark, among other applications.

Risk characteristics

Companies represented in the FTSE Fledgling are generally smaller than companies in the FTSE All-Share.

Smaller companies can have characteristics such as:

• lower trading liquidity;
• greater company-specific risk;
• higher price volatility;
• smaller market capitalization;
• wider bid-ask spreads.

These characteristics do not apply uniformly to every constituent.

Because the FTSE Fledgling has no liquidity requirement, the index can include securities with relatively limited trading activity.

Benchmark

The FTSE Fledgling can be used as a benchmark for portfolios focused on very small UK-listed companies.

A simplified active-return calculation is:

$\text{Active Return}=\text{Portfolio Return}-\text{Benchmark Return}$

FTSE All-Small

The FTSE All-Small provides a broader measure of smaller UK-listed companies by combining the FTSE SmallCap and FTSE Fledgling.

A simplified relationship is:

$\text{FTSE All-Small}=\text{FTSE SmallCap}+\text{FTSE Fledgling}$

The FTSE All-Small therefore covers a broader range of smaller companies than either index individually.

Importance

The FTSE Fledgling provides a benchmark for companies that are eligible for the FTSE UK Index Series but are too small to qualify for the FTSE All-Share. It complements the FTSE SmallCap and contributes to the broader FTSE All-Small universe, providing market participants with a means of measuring the performance of the smallest companies represented in the FTSE UK equity-index framework.

See also

• FTSE 100
• FTSE 250
• FTSE 350
• FTSE SmallCap
• FTSE All-Share Index
• FTSE All-Small
• FTSE UK Index Series
• London Stock Exchange
• FTSE Russell
• London Stock Exchange Group
• Stock market index
• Market capitalization
• Free float
• Index fund
• Exchange-traded fund
• Benchmark (finance)
• Portfolio management
• Passive management