Active managers primarily use index data to benchmark investment performance, but a new study by Greenwich Associates suggests there are significant opportunities for active managers to derive more value from data and partnerships with index providers.
The Greenwich report into asset managers’ attitudes to indexes and their providers is one of the first of its kind. It is based on interviews with asset management company executives and active management investors in North America ranging up to $50 billion or more of assets under management. While FTSE Russell is already proactively engaging with clients to hear and understand their views, we sponsored the study to provide an independent, impartial and quantitative view to help us understand how we can serve our clients more effectively. Delivering market-leading value for our services is a key business priority for us. Independent research offers active managers an opportunity to speak frankly about our industry: the importance of our products to their business, their concerns about licensing costs - and critically, what the industry can do to help them realize value from their spend on indexes and related data.
The report finds that an overwhelming majority of active managers recognize the vital role benchmarks play in every step of the investment process, active and passive. More than 80% agreed that benchmarks were important or very important. In the process, the study revealed the increasingly wide range of uses for benchmark data in activities such as investment performance evaluation, analysis of financial trends, forecasting, and asset allocation development strategies, as well as in enterprise risk management, alpha generation and asset managers’ marketing materials.
At the same time, the study showed that there are significant opportunities for asset managers to derive more value from benchmark data and from their partnership with index providers. Respondents saw an opportunity for index companies to provide better tools and analytics to assist with the investment process, to incorporate more industry feedback into the index construction process, and provide more customer support. Additionally, asset managers would like to see index providers using their data, analytics and intellectual capital in creative ways to offer services beyond their core benchmark business. Half of the executives interviewed agreed that index providers can help drive industry change, such as around ESG.
In particular, asset managers are looking for more value from index providers in the form of thought leadership and original research to support them in making complex investment decisions. With their abundance of data and analytical expertise, indexing companies should be well placed to provide additional context and insight into financial markets that could significantly enhance the value of their underlying index products and extend their already close partnership with their clients.
FTSE Russell already makes stronger client relationships a key priority, listening closely to clients and incorporating their feedback into our decisions. At the same time, we are investing in a range of value-enhancing products and services across our business, expanding research and strengthening our technology, content, and regulatory infrastructure to ensure a high quality, reliable service.
Through organic growth and acquisitions we have expanded our capabilities. Above all, as client requirements evolve in line with market developments, we will continue to listen to our clients and respond to their needs, providing them with new tools to grow their business and help them prepare for the future.
Download the full Greenwich Associates report, Benchmarking the Value of Indexes Among Active Managers.
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