The Index Industry Association (IIA), a trade association for the index industry, has published the results of its second annual global index survey.
Rick Redding, the CEO of Index Industry Association.
The results suggest that there are 3.727 million indices globally, an increase of approximately 438,000 indices since the survey was first conducted in June 2017.
The survey, which was conducted as of June 30, 2018, sought information on the total number of indices administered by each of the fourteen IIA members.
IIA members include the biggest names in indexing, such as FTSE Russell, MSCI, S&P Dow Jones, Stoxx, Bloomberg and IHS Markit, and it is estimated that these providers’ indices represent approximately 98 percent of all indexes globally available.
Growth of fixed income benchmarks
According to the survey, fixed income saw the largest growth compared to other asset classes. As a result, fixed income indices now represent approximately 16 percent of the overall index universe. The significant increase in this asset class was due to a number of factors including new product innovation, demand from investors for more precise exposures and some consolidation of index families to independent providers.
When looking at fixed income growth by geography, the Americas represent approximately 36 percent of total fixed income indices available, rising 3 percent year-over-year. EMEA (31% overall) saw a 2 percent increase and Frontier/Emerging markets experienced the largest increase, growing nearly 7 percent to approximately 7.5 percent of overall fixed income indices by geography. APAC (9% overall) and Global (17% overall) fell 5 percent and 8 percent year-over-year, respectively.
Rick Redding, the CEO of IIA, commented: “Last year we were able to quantify the index landscape for the first time ever. Now that we have a baseline, it’s fascinating to see the amount of innovation coming out of fixed income where investors are looking for more fine-tuned benchmarks. As the quality of the underlying data improves, it allows index providers to create and administer indexes in new areas beyond the core benchmarks and in new geographies. In addition, we are seeing a strong investment in research and development by index providers into building out their fixed income capabilities to offer to clients.”
ESG, smart beta and factors lead growth in equities
According to the survey, the total number of equity indices dropped by 3 percent globally to 3,068,871. Sector-focused indices was the only category to experience a decline, as the number of sector indices dropped from approximately 43 percent to 40 percent of total equity indices.
The most dramatic increase came from Environmental, Social & Governance (ESG) indices, which grew 60 percent in the total number of indices year-over-year.
“The data shows that overall number of equity indexes remained rather consistent across most categories. However, the growth and innovation in ESG, factor and smart beta indices over the past year has been impressive. While these areas still represent a small portion of the total index landscape, investors are demanding more choices and as a result, providers are creating new indexes where they can offer more targeted exposure,” Redding continued.
Global indices still represent the majority of equity indices by geography at approximately 30 percent, but the largest growth came from APAC which saw a 2 percent increase year-over-year to approximately 26 percent of total equity indices. EMEA and frontier/emerging indexes now represent 22 percent and 13 percent of indices globally, while the Americas have the fewest number of equity indices at 10 percent.
An ETF issuer’s view
Commenting on the survey, Hector McNeil, Co-CEO of ETF white-label platform HANetf, said: “The idea that the number of indices is indicative of anything other than the propensity of index providers to create new benchmarks is absurd. A large index provider like FTSE Russell or MSCI may well claim to publish 100,000’s of indices, but only a tiny fraction of them are ever referenced or adopted by the market.
“When it is clearly so easy to churn out millions of indices every day, index consumers and investors really have to question the consistently inflation-busting price increases of the big indexers and whether the claimed investment into R&D these price increases finance, is delivering real innovation and value.”