“In a world where prices on indexed funds are continuing to go down, the rest of the stack has to consider that,” Joe Brennan, global head of Vanguard Group’s equity index group, said. “Maybe there’s some different pricing schemes that could work.”
Over 50% of indexed ETFs that launched this year aren’t using the “Big Three” – S&P, MSCI or FTSE Russell, opting for alternatives like Solactive AG, which charges a flat annual fee that’s based on the complexity of its benchmark, looking to their own resources.
For instance, BlackRock started its first self-indexed funds last month, with Laurence Fink, the firm’s chief executive, explaining it as “one of the ways we are using our scale and technology to reduce manufacturing costs.” Over 80 funds changed their benchmark in 2016, the most since at least 2010.
“It’s actually a race toward zero and index providers need to react to that as well,” Steffen Scheuble, the chief executive of Solactive, told Bloomberg.
For more information on ETF indexing, visit our indexing category.