ETFs were made from passive indexing, but as investors demand more from their investments, the indexing landscape is beginning to change.
“We’re basically the Intel inside of your PC. You think of us as the portfolio manager that are underneath and managing that portfolio,” said Ken O’Keefe, Global Head of ETFs at FTSE Russell, at the Charles Schwab IMPACT 2018 conference.
Index providers had it relatively easy at the beginning stages of industry growth as they only need to provide market cap-weighted indexing methodologies that more-or-less tracked broad, widely observed benchmarks. However, as the industry grows and matures, there is more that goes into the back-end of the ETF production.
“Now, it’s much more. We sit down with ETF provider. They’re looking for something that is going to better meet the needs for financial advisors, and they’re turning to us for help in designing that,” O’Keefe said.