New York, January 9, 2016 – Index Industry Association (IIA), an organization that represents worldwide index administrators through its work to promote awareness of the function of indexes in global markets, has today released findings from its first survey of its member firms. The survey, conducted in November 2016, offers an overview of the key index issues and innovations important to IIA’s industry-leading members. Since its launch in 2012, IIA has offered the index industry a way to advocate for independence and transparency in indexes, in order to serve the needs and interests of investors.
“As innovation in the investment industry grows, it becomes even more important to address the topics that will help index administrators serve the needs of investors. This survey brings together a variety of opinions across the index industry and finds several common themes,” says Richard Redding, chief executive officer of IIA.
Current IIA members were asked to respond to a member survey regarding the innovations, benefits and issues forming the current index landscape, and three points were agreed upon by its members.
I. The most significant innovation in indexes has been the growth of smart beta indexes:
While factor-based investing is not new, a majority of IIA members feel the act of bringing the discipline of a rules based methodology to a strategy different from traditional cap-weighted benchmarks is driving innovation in the industry and providing more choices for investors. Overall, IIA members felt that innovation around smart beta indexes has opened access to a wider variety of new investment opportunities for a broader population.
II. The greatest index-related investor benefits have been in the increase in benchmark objectivity and decrease in the overall average fund expenses:
IIA members agreed that indexes have become accurate benchmarks for various economic activities and have dramatically reduced fund expense ratios. Intense competition has benefited investors through reduced fees and allowed investors access to new asset classes and investment options.
III. The biggest misconception of index administration is that index administrators create the end products:
A quorum of IIA members agreed that the biggest misconception in the index industry is the idea that an independent index administrator creates and offers investible products directly to investors. Independent index administrators maintain strict separation between commercial operations and the index administration function. Independent index administrators do not trade the underlying component securities nor do they issue products traded by investors, thus mitigating conflicts that could naturally arise if they did.
“Indexes have an increasingly important dual role for providing both benchmarks for investment management and the underlying index administration for the growing index-based asset management industry including the exchange-traded fund (ETF) space. For this reason IIA members believe it is valuable to highlight the issues and topics they feel will have the biggest impact on the index industry,” says Redding.
About Index Industry Association (IIA)
IIA is an independent, not-for-profit organization based in New York that represents the global index industry. Founded in March 2012, the association is the first ever index industry trade body and it is committed to representing the global index industry by working with market participants, regulators, and other representative bodies to promote sound practices in the index industry that strengthen markets and serve the needs of investors. Our members have calculated indices since 1896 and, in the aggregate, the members of IIA calculate approximately two million indexes for their clients, covering a number of different asset classes, including equities, fixed income, and commodities.
Many of the leading index providers in the world are members of IIA, including Bloomberg Barclays, Chicago Booth Center for Research in Security Prices, FTSE Russell, Intercontinental Data Services, IHSMarkit, Morningstar, MSCI Inc., Nasdaq Global Indexes, S&P/Dow Jones Indices, SGX and STOXX.
For more information on the IIA 2016 Member Survey or to speak with Richard Redding, please contact Intermarket Communications: