A survey of the global index universe by the Index Industry Association (IIA) shows the count of indexes declined by 20% in 2019 from 2018.

The total number of indexes had grown from 3.29 million in 2017 to 3.73 million in 2018. However, in 2019 the number declined sharply to 2.96 million.

Net count of indexes down in 2019 due to decommissioning

The above result was from IIA’s third annual global survey. The decline of 20% in the global count for 2019 was due to the normal ‘decommissioning’ of irrelevant ones. Usually, new introductions counterbalance the decommissions. However, in 2019, there were larger than the usual number of decommissions in the ‘Equities’ and ‘Other’ categories.

Presumably, most of the equity scrappings might have come from the passive investing segment, which had been on an inexorable upward march in recent times.

“Every firm continuously evaluates their indexes to see if they are redundant, which helps keep costs down for their clients,” said Rick Redding, the IIA’s chief executive. “Ultimately, our members are focused on providing the quality of indexes investors demand that they administer and not necessarily the quantity.”

Some bright spots, however

The fixed income asset class grew the most, up 7.15% by number in 2019.

However, the Environmental, Social, and Governance (ESG) segment grew an impressive 13.85%. But this segment spanned both fixed income and equities asset classes.

“Providers are continuing to expand their fixed income offerings to give investors more accurate benchmarks,” said Redding. “Moreover, the number and variety of ESG indexes indicate that investors are looking for benchmarks that conform to their investment objectives and beliefs.”

IIA

Founded in 2012, IIA is the first-ever trade association for the industry. Based in New York, it is a not-for-profit organization. Members include Bloomberg, CBOE Global Markets, Chicago Booth Center for Research in Security Prices, China Central Depository and Clearing, FTSE Russell, Hang Seng, ICE Data Services, IHS Markit, Morningstar, and MSCI Inc.

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