2015 Year in Review: Investor Demand Drives Rise of Specialist Indexes

To help investors integrate ESG into their investment strategies, FTSE Russell’s ESG arm announced plans to roll out a ratings data platform next year (IMD, Sept. 14), which will make available to subscribers raw data on European, Asian and American companies. FTSE ESG already provides benchmarks, data, analytics, and the FTSE4Good index series to investors who want to integrate ESG factors into their portfolios, and is now responding to growing demand from institutional investors—rather than just ethical value-led investors—for more underlying data so they can take their own views on what they deem important information.

Along with greater availability of information comes the need for tools to make sense of it. Zurich-based ESG risk data provider RepRisk was one of the most active players in this space this year, with a flurry of developments as it looked to move beyond being known as just a provider of ESG data by diversifying its offering and playing a more active role in the decision-making process (IMD, July 24).

ESG wasn’t the only space where vendors spotted an opportunity to carve out a niche for specialist index and data products.  Social media sentiment analysis provider Market Prophit launched a “smart beta” investable index (IMD, May 8) to reflect the “real-time pulse of the market,” based on real-time sentiment analysis of social media chatter about stock markets, and also announced plans to expand its offering into other social media-based indexes that could form the basis for investable products such as ETFs.

Elsewhere, European exchange group Euronext set out extensive plans to promote its expanding specialist index business by creating a niche for itself as a global index player (IMD, Nov. 23), following a rise in revenue from clients launching new index-related products. However, the added interest is also a result of the exchange gaining new business because on its upgraded index platform, IndexMotion, previously known as Euronext Index Services (IMD, May 29), driven by new regulatory requirements which mean firms must separate investible products from the calculation of their underlying indexes, driving banks to outsource index calculations to venues such as Euronext.

Whereas some exchanges were looking to bolster their index offerings this year, SIX Group announced in July (IMD, Aug.3) that it had completed the sale of its shares in index joint venture Stoxx and its index calculation and operation business Indexium for CHF (Swiss francs) 650 million ($611 million) to co-owner Deutsche Börse, stating it was not part of SIX’s “core mandate.” The move is already having a positive impact for Deutsche Börse, which cited its new subsidiaries as a key factor for higher Q3 net revenues (IMD, Nov. 9) fueled by increasing investor appetite for passively managed financial products, such as exchange-traded funds, which led to an increase in assets under management in these products.