FTSE Group, one of the largest index providers globally, is
creating a new service unit designed to cater exclusively to ETP
sponsors in a move that signals the firm's resolve to expand its
presence in the ETF market, particularly in the U.S.
The new unit will bring together "research and relationship
management resources" to provide support and expand services and
products for the ETP industry, the company said in a press release.
Jonathan Horton, FTSE's North America president, will head up the
unit.
The indexing giant is no stranger to the ETF market, having seen
its ETF-linked assets under management balloon fivefold in the past
three years. Many ETF providers already use FTSE benchmarks for
their funds. One of the better-known among them is the $4.7 billion
iShares FTSE China 25 Index Fund (NYSEArca:FXI).
Most recently, Vanguard's decision to ditch MSCI on 22 ETFs, six
of which are being transitioned over to FTSE indexes, catapulted
FTSE's name into the spotlight in the United States. FTSE has a
bigger profile in international equity markets than here.
FTSE officials, on the heels of the Vanguard deal, have made a
great effort to emphasize that the new partnership is the beginning
of a big U.S. push. FTSE, which ranks third-largest among equity
ETF index providers worldwide, is looking to expand its footprint
in an ETF market it believes will see growth accelerate in years
ahead.
FTSE's Horton, speaking at a IndexUniverse-sponsored webinar
earlier this week, drove that point home by saying that the
Vanguard deal was a "big win" for FTSE. It was a major step in the
company's market-share and brand-equity building in the U.S., but
just one step, he said.
All About Choice
"This is a transformational deal-it raises our visibility in the
U.S.," Horton said at the time. "But more broadly, for the ETF
marketplace, it's a story about choice."
"Competition in any market is good," Horton added during the
webinar Wednesday that addressed the FTSE-Vanguard deal. "Choice is
a good thing for the market; for investors, for everyone."
Competition has indeed marked the impressive growth story of the
ETF market. Cheaper, more transparent and liquid ETFs have slowly
been eroding what has been a largely unchallenged mutual fund
dominance both here and abroad.
The 20-year-old ETF industry has been eating away at mutual
funds, and in the past year alone, assets are moving into equity
ETFs while moving out of equity mutual funds-a powerful
suggestion of a trend many expect to continue as more and more
investors learn about the intrinsic benefits of ETFs relative to
their competitors.
"As one of the world's largest index providers, we are
determined to significantly increase our share of the global ETP
benchmark market," Mark Makepeace, FTSE's chief executive officer,
said in the press release.
"FTSE believes that this growth will only accelerate as
investors turn to ETPs in their search for low-cost, transparent
diversification solutions," the company added in the release. "The
steady proliferation of ETPs across alternative asset classes such
as commodities and currencies underlines this trend, as does the
growing number of alternative options to traditional cap-weighted
indices."
There are today an estimated $3 trillion globally benchmarked to
FTSE indexes, and nearly a third of the company's revenues are
generated in North America, Horton said.
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