One of the unsung heroes of the phenomenal growth in the exchange traded fund space is the index providers behind the scenes that helped expand the passive, index-based ETF universe.
ETF Trends publisher Tom Lydon spoke with Shaun Wurzbach, Managing Director and Global Head of Financial Advisor Channel at S&P Dow Jones Indices, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about developments in the indexing world.
“Our SPIVA data and persistence data; they make the case that indexing is effective within the core space, but our focus these days with advisors is to talk about things like dividend strategies and factor based,” Wurzbach said. “You think about the type of institutional strategies that can be indexed.”
Some may think that index providers would have a hard time getting along with active money managers, but advisors are increasingly look for new ways to gain exposure to the markets.
They are “active in a different way,” Wurzbach said. “They’re active in terms of their asset allocation and their asset management, and the way they think about indexing and ETFs are as powerful tools that they use to construct an asset allocation that’s risk managed for their clients.”
Index providers help active advisors see under the hood and understand how index-based tools can better work for their clients.
After decades where index-based investment have dominated the investment landscape, more institutional clients are also looking at ways index providers can expand beyond the traditional market capitalization-weighted methodology. Consequently, we may continue to see innovation and more smart beta or factor based indices, along with passive ETFs that track them.
“It’s a time of innovation and disruption within the industry, so good ideas are coming from all places,” Wurzbach added.