The global investment index population sits at almost 3.3 million, a first-of-a-kind survey has found, placing the sector somewhere between Mongolia and Puerto Rico if it was a nation state.
In an inaugural study published late in January, the Index Industry Association (IIA) counted 3.288 million investment indices across its 14 members who collectively manage about 98 per cent of the world’s financial benchmarks.
Rick Redding, IIA chief, said in a statement that the survey – carried out last June – was the first-ever census of the global index population.
“… and the results are enlightening.,” Redding said in the release. “Oftentimes the discussion revolves around products, but with approximately 5,300 exchange-traded funds worldwide, the results show that benchmarking is clearly the predominant use for indexes around the world.
“With over three million indexes available, asset managers and investors want choices when choosing a benchmark that best represents their portfolio and the underlying market.”
However, equity benchmarks dominate the IIA survey, constituting over 95 per cent of the total index count. Global share yardsticks represent almost 30 per cent of the equity index subset followed by Asia-Pacific and EMEA (Europe, Middle East and Africa) regions – each accounting for 24 per cent – and frontier/emerging markets (14 per cent).
The Americas, which represent just 9 per cent of all equity indices, house the most fixed income benchmarks (or 33 per cent). EMEA (29 per cent), global (25 per cent), Asia-Pacific (14 per cent) and frontier/emerging markets (0.5 per cent) share the remaining fixed income indices, the survey shows.
“The geographical breakdown of equity indexes may initially come as a surprise, but when you think about the number of industries and sectors in each country across the globe, it makes sense that Europe and Asia have a larger share of the index landscape,” Redding said. “On the flip side, fixed income results favour the Americas because issues like market structure, taxable status, and size of the securitisation market have created much more demand for indexes in sovereign, composite, high yield, and securitisation.”
He said environmental, social and governance (ESG) and so-called ‘smart beta’ indexing remain a small part – under six per cent – of the benchmark universe in spite of the growing profile of the two investment strategies.
“There is much more interest in traditional market cap indexes and our results show that industry and sector-specific indexes are the most common,” Redding said.
Formed in 2012, the IIA touts itself as an “independent, not-for-profit organisation representing the global index industry” with members including the three largest benchmark providers – FTSE Russell, MSCI and S&P Dow Jones – and other financial information suppliers such as Bloomberg, Nasdaq, and Morningstar.