Index numbers drop but fixed income and ESG show growth
The Index Industry Association (IIA) has announced the results of its third annual global index survey, revealing that the number of indexes globally has decreased year on year by 20 per cent.
The IIA figures reveal 2.96 million indexes globally. According to the IIA’s two previous surveys, the total number of indexes rose from 3.29 million in 2017 to 3.73 million in 2018.
The IIA reports that the 20 per cent lower number is due to the decommissioning of indexes, a process which occurs every year to ensure indexes are not redundant. Previously, this has been offset by the addition of new indexes, but there were a large number of decommissions in both equities and ‘other’ categories in the past year, the association says.
Rick Redding, the CEO of IIA commented: “Every firm continuously evaluates their indexes to see if they are redundant, which helps keep costs down for their clients. Ultimately, our members are focused on providing the quality of indexes investors demand that they administer and not necessarily the quantity."
Fixed income was the asset class that increased by the largest amount, achieving 7.15 per cent growth between 2018 and 2019. When looking at fixed income indexes by geography, Europe, the Middle East and Africa (EMEA) experienced the largest increase in the last year, going from 31 per cent to 33 per cent of the total fixed income indexes, while Global fixed income indexes grew by 1 per cent. EMEA is catching up to the Americas, which now account for 34.24 per cent of fixed income indexes. The Americas and Emerging and Frontier Markets saw modest declines of approximately 1 per cent each, while the Asia-Pacific (APAC) region’s indexes decreased by only 0.5 per cent.
Fuelled by investor demand, there has also been impressive growth and innovation in Environmental, Social and Governance (ESG) indexes over the past year—13.85 per cent across equities and fixed income, according to the IIA statistics.
Added Redding, “With three years of data to analyse, we can see interesting trends developing in fixed income and ESG. Index providers are continuing to expand their fixed income offerings to give investors more accurate benchmarks. Moreover, the number and variety of ESG indexes indicate that investors are looking for benchmarks that conform to their investment objectives and beliefs.”