Index providers are riding the wave of passive management

Posted on Feb 22, 2019 2021 at 18:22Updated Feb 22, 2019 2021 at 18:25

MSCI, S&P, FTSE… Their names are essential in the markets and yet the activity of these companies is often poorly known beyond their flagship stock indexes. However, the development of passive management, and in particular ETFs (listed index funds), is boosting the income of index providers. These players are mainly remunerated on the media that follow their indices, with costs proportional to their outstandings, as well as on the derivative products referencing them. The latest industry study from consulting firm Burton-Taylor reports a record $ 3.7 billion in revenue in 2019, growing 11% per year on average over five years.

According to The IIA, the industry’s trade association, there are over 3 million indices worldwide. But, only a handful have established themselves as a real brand, like the S&P 500 for the US market or the MSCI AC World for international equities. As a result, the market is concentrated in the hands of a few operators. Globally, three players – MSCI, S&P Dow Jones and FTSE Russell – have a 70% market share. In Europe, the MSCI indices stand out with $ 371 billion worth of ETFs replicating its indices, according to ETFGI.

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