More than 80 funds changed their benchmark in 2016, the most since at least 2010, according to specialist data provider ETP Resources, which is based in Dublin, Ohio. Cost isn’t the only factor, according to ETP’s Jim Simpson, who sees benchmarks increasingly being switched or remade to help funds that are bumping up against regulatory caps on what they can own, having grown too big for their indexes.
While the business is undeniably in flux, regime change won’t happen overnight. Some $2.3 trillion, or roughly 50 percent of the assets in global ETFs, are in funds backed by S&P, MSCI and FTSE Russell, earnings statement show. In all, about $11.7 trillion is indexed or benchmarked to S&P indexes, while FTSE Russell has $15 trillion following its benchmarks, according to the companies.
And the big providers are pushing to keep those assets. S&P is partnering with global exchanges and emphasizing brand and reach. FTSE Russell is focused on winning over institutional investors with its scale and investing in product research. Innovation is a buzzword, and both have their eyes on nascent markets around the world.
Cost matters -- but it’s not everything, says Mark Makepeace, the London-based head of FTSE Russell.
“The business model will evolve, but it’s going to be led by the customer,” he said by phone. “If all you do is compete on fees, you’ve lost the battle of ideas and, first and foremost, we compete on ideas and providing the best product. The fees come after.”
This story was provided by Bloomberg News.