Exchange traded fund (ETF) investors are concerned that Morgan Stanley’s plans to take the MSCI (Morgan Stanley Capital International) Indexes public could create conflicts of interest. What would happen when an index company must answer to ETF shareholders?
Last month, Morgan Stanley filed papers with the SEC for an IPO of MSCI. If the filing goes through, MSCI could be the first publicly traded company in the indexing business. Also, the new IPO could create the potential for new, highly-specialized indexes that are even more narrow than the ones currently available, reports David Hoffman for Investment News. In turn, that could lead to an increase in ETF failures because ETFs based on niche indexes might have a difficult time attracting assets. Pressure to meet shareholder demands for earnings could lead an indexer such as MSCI to search for creative ways to make more money. Things could get complicated if some shareholders knew index information ahead of other market participants.
While some analysts are concerned, others see the filing as no different than any other. No advantages or disadvantages are associated with it, they say.
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