Index Providers Take on Active Management with ETFs | ETF Trends

The latest segment of the exchange traded fund industry to get in on active management are the index providers. Four of the largest indexers are selecting methods to outperform the traditional market-cap weighted index, giving active managers a run for their money.

“In addition to taking over a larger share of the broad market, ETFs could also grow in terms of complexity and structure,” The Street reports.

As index-based trading becomes more popular, as in the ETF market, ETF sponsors and index providers will “push to develop new and interesting indexes,” Michael Mundt of Stradley Ronon Stevens & Young said in the article. [ETFs, Innovation, 401(k) Plans and the Dividend Trade]

The four-largest index providers – FTSE International, Russell Investments, S&P Dow Jones LLC and MSCI – are creating new rules-based ways to select stocks that aim to outperform traditional market-cap-weighted indexes, thereby pitting them against active money managers, reports Drew Carter for Pensions and Investments. [Active ETFs: Beyond the Hype]

The line between indexing as a means of performance measurement has been blurred into being providers of insight and strategies with the use of ETFs. Additionally, index providers are busy in the cross-selling and business acquiring taking place within the industry.