Vanguard’s recent benchmark shakeup at its exchange traded funds has created upheaval in the index management business. Now, more ETF firms are deciding to manage their own indices rather than pay benchmark licensing fees to third-party providers.
For example, ProShares in a recent regulatory filing requested permission from the SEC to use in-house indices for its ETFs, Benzinga reports.
Van Eck’s Market Vectors and WisdomTree (WETF) are among the firms that already run ETFs based on their own benchmarks.
Vanguard’s decision to drop MSCI (MSCI) benchmarks from its ETFs in favor of other index providers “does reflect multiple options out there for indices,” said Adam Phillips, chief operating officer at Van Eck.
For some ETFs, Van Eck licenses benchmarks from independent providers but also uses indices from its own index affiliate. “We’re always looking at ETF fees,” Phillips said. “We’re trying to keep it low-cost.” [Van Eck Among ETF Firms Using Home-Grown Indices]
Meanwhile, WisdomTree uses its own indices for ETFs that weight stocks by fundamental factors, rather than by market capitalization like most traditional equity benchmarks. For example, WisdomTree maintains indices that weight companies by dividends and earnings that form the basis of its ETFs.
The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.