After Vanguard’s decision to swap out a bundle of exchange traded fund underlying MSCI indices for FTSE and CRSP benchmarks in an attempt to cut costs, the industry has put the spotlight on indexing. Nevertheless, when it comes down to it, it’s the investor’s opinion that really matters.

“The lion’s share of asset managers are saying the index does matter,” Ken O’Keeffe, managing director of investable products at Russell Indexes, said in an Ignites article. “Why? Because it matters to their clients.” [ETFs Target Indices to Lower Fees Even More]

Especially in the institutional space where some are mandated to follow certain benchmark indices, brand recognition in broad-market benchmarks and trust in index construction matter. Consequently, some ETF managers have followed suit, adhering to blue-chip indices even though there are cheaper options available. [Vanguard Shift Puts Focus on ETF Benchmarks]

Dodd Kittsley, iShares head of global exchange-traded product market trends research, previously pointed out that the S&P-, MSCI- and Russell-benchmarked ETFs account for 85% of U.S. equity assets, and MSCI also made up a 60% market share in emerging market ETF assets and 51% in global assets.

“Clearly, when it comes to choosing an index to track, many investors favor certain index providers for specific exposure types,” Kittsley said.

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