As investors gain familiarity with exchange traded funds, more are searching for the best product to track or beat the market, which has put pressure on index providers to create better benchmarks.
ETF providers now have the flexibility to pick from multiple index providers that offer similar benchmarks, writes John L. Jacobs for Pensions & Investments. Consequently, the increased competition among index providers has helped drive down costs and reduce ETF expense ratios.
For instance, Vanguard decided to drop the benchmarks on a group of ETFs benchmarked to MSCI indices for FTSE and University of Chicago’s Center for Research in Security Prices (CRSP) indices in 2012 to lower costs. [Vanguard ETFs Gather $40 Billion After Index Switch]
As the ETF industry continues to expand, the differences between various index providers is quickly blurring, allowing ETF providers to switch from one indexer to another.