Bloomberg LP, the parent of Bloomberg News, owns an indexing business that competes with S&P, MSCI and FTSE Russell.

Issuers are taking a hard look at their expenses as investors increasingly funnel cash into the cheapest strategies. Of about $500 billion that’s flowed into index funds over the last year, more than 70 percent has gone into those charging 10 basis points or less, encouraging a wave of cost cutting, according to Bloomberg Intelligence.

BlackRock Inc., the world’s largest ETF provider, has slashed fees on a $10.8 billion mortgage-debt fund, three ETFs screened for environmental, social and governance metrics, and eight debt funds -- all in the last six weeks.

Finding Alternatives

“In a world where prices on indexed funds are continuing to go down, the rest of the stack has to consider that,” Joe Brennan, global head of Vanguard Group’s equity index group, said last month. “Maybe there’s some different pricing schemes that could work.”

Vanguard, which passively manages about 75 percent of its $4.4 trillion assets, was an early challenger of index costs. Five years ago it ditched MSCI on 22 funds to get lower fees. MSCI said at the time that it was disappointed with that decision. A media representative declined to comment further when contacted by email.

Many new fund issuers are steering clear of the “Big Three.” More than 50 percent of indexed ETFs started this year aren’t using S&P, MSCI or FTSE Russell, data compiled by Bloomberg show. Some opted for smaller providers, like Solactive AG of Frankfurt, which charges a flat annual fee that’s based on the complexity of its benchmark. Others have looked to their resources.

Evolving Model

BlackRock, for instance, started its first self-indexed funds last month, with Laurence Fink, the firm’s chief executive, describing it as “one of the ways we are using our scale and technology to reduce manufacturing costs.” Charles Schwab Corp., meanwhile, is seeking approval for what could be the first no-fee ETF, made possible by using a homemade index, another first for the firm.

“It’s actually a race toward zero and index providers need to react to that as well,” said Steffen Scheuble, the Frankfurt-based chief executive of Solactive, which has about $20 to $25 billion in ETFs following its benchmarks.