FTSE Group, one of the largest index providers globally, is creating a new service unit designed to cater exclusively to ETP sponsors in a move that signals the firm’s resolve to expand its presence in the ETF market, particularly in the U.S.
The new unit will bring together “research and relationship management resources” to provide support and expand services and products for the ETP industry, the company said in a press release. Jonathan Horton, FTSE’s North America president, will head up the unit.
The indexing giant is no stranger to the ETF market, having seen its ETF-linked assets under management balloon fivefold in the past three years. Many ETF providers already use FTSE benchmarks for their funds. One of the better-known among them is the $4.7 billion iShares FTSE China 25 Index Fund (NYSEArca: FXI).
Most recently, Vanguard’s decision to ditch MSCI on 22 ETFs, six of which are being transitioned over to FTSE indexes, catapulted FTSE’s name into the spotlight in the United States. FTSE has a bigger profile in international equity markets than here.
FTSE officials, on the heels of the Vanguard deal, have made a great effort to emphasize that the new partnership is the beginning of a big U.S. push. FTSE, which ranks third-largest among equity ETF index providers worldwide, is looking to expand its footprint in an ETF market it believes will see growth accelerate in years ahead.
FTSE’s Horton, speaking at a IndexUniverse-sponsored webinar earlier this week, drove that point home by saying that the Vanguard deal was a “big win” for FTSE. It was a major step in the company’s market-share and brand-equity building in the U.S., but just one step, he said.
All About Choice
“This is a transformational deal—it raises our visibility in the U.S.,” Horton said at the time. “But more broadly, for the ETF marketplace, it’s a story about choice.”
“Competition in any market is good,” Horton added during the webinar Wednesday that addressed the FTSE-Vanguard deal. “Choice is a good thing for the market; for investors, for everyone.”
Competition has indeed marked the impressive growth story of the ETF market. Cheaper, more transparent and liquid ETFs have slowly been eroding what has been a largely unchallenged mutual fund dominance both here and abroad.
The 20-year-old ETF industry has been eating away at mutual funds, and in the past year alone, assets are moving into equity ETFs while moving out of equity mutual funds—a powerful suggestion of a trend many expect to continue as more and more investors learn about the intrinsic benefits of ETFs relative to their competitors.
“As one of the world’s largest index providers, we are determined to significantly increase our share of the global ETP benchmark market,” Mark Makepeace, FTSE’s chief executive officer, said in the press release.
“FTSE believes that this growth will only accelerate as investors turn to ETPs in their search for low-cost, transparent diversification solutions,” the company added in the release. “The steady proliferation of ETPs across alternative asset classes such as commodities and currencies underlines this trend, as does the growing number of alternative options to traditional cap-weighted indices.”
There are today an estimated $3 trillion globally benchmarked to FTSE indexes, and nearly a third of the company’s revenues are generated in North America, Horton said.
The in-kind stock transaction used in the Duracell deal lies of at the heart of every ETF, and has the same benefit: tax efficiency.
Stock investors are used to splits, but why all the reverse splits in ETFs?
Falling gas prices and a strong buck may boost retail stocks, but the favorite ETF may not be the best play.
An alluring new bond ETF focused on China’s mainland credit market comes with a few caveats.