Exchange traded fund providers are starting to question the premiums for doing business with large index providers as index brand-name recognition is no longer as important.
The majority of ETFs use index benchmarks provided by companies like Standard & Poor’s, MSCI Inc and FTSE Group, but with the rising popularity of ETFs, fund brand names are starting to hold their own and companies are negotiating for lower licensing fees, writes Jason Kephart for InvestmentNews. [ETFs, Index Funds Projected to Hit $10.4 Trillion by 2017]
“The value is changing,” Mark Wiedman, global head of BlackRock‘s iShares unit, the largest ETF provider, said at an industry conference last month, arguing that prominent ETF brands now give sponsors greater bargaining power.
At the end of the day, industry experts predict that the lower indexing fees could ultimately translate to lower expenses for investors.
“If they can use their scale to bring costs down, that’s a good thing for investors,” Todd Rosenbluth, director of ETF research at S&P Capital IQ, said in the article. “It’s a bad thing for index providers.”