Number of indexes on the rise, led by fixed income: report
BY Benefits Canada Staff | November 21, 2018
The number of indexes at an investor’s fingertips grew by 12 per cent (or 438,000) in 2018, rising to 3.72 million distinct indexes globally as of June 30, 2018, according to a new report by the Index Industry Association.
The association, which began tracking the world’s indexes in 2017, found fixed income was a popular theme during the last year. Demonstrating the largest growth, fixed income now comprises 16 per cent of the overall index universe. The boost is due to product innovation and investor demand for more precise exposures, noted the report. The subcategories featured in fixed income indexes also grew, including composite and municipal bonds. As well, frontier and emerging markets experienced the largest increases in these indexes, growing by seven per cent.
“Last year, we were able to quantify the index landscape for the first time ever,” said Rick Redding, the chief executive officer of IIA, in a press release. “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.”
Equity indexes also grew in specific areas, but their number shrank overall, according to the report, noting the total number dipped by three per cent to 3,068,871. Sector-focused indexes declined from 43 to 40 per cent of overall equity indexes. Conversely, environmental, social and governance-themed indexes grew by 60 per cent in 2018.
“The data shows that the overall number of equity indexes remained rather consistent across most categories,” said Redding. “However, the growth and innovation in ESG, factor and smart beta indexes 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.”
This article originally appeared on CIR’s companion site, Benefitscanada.com. Read the full story here.