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Passive proliferation slows as 770,000 indexes scrapped in 2019

Vanguard, Blackrock and State Street have 83% of U.S. ETF assets, 50% of total ETF revenue and own the 50 largest ETFs.

The seemingly inexorable march of passive investing looks to have hit a roadblock.

The number of indexes around the world fell more than 20% to 2.96 million in 2019 as benchmark providers scrapped some of their gauges, according to a new report from the Index Industry Association. For the first time since the organization started conducting its now annual survey two years ago, the decommissioning of redundant measures outweighed the creation of new benchmarks.

“Every firm continuously evaluates their indexes to see if they are redundant, which helps keep costs down for their clients,” said IIA CEO Rick Redding. “Ultimately, our members are focused on providing the quality of indexes investors demand that they administer and not necessarily the quantity.”

The correlation between fees and performance is not “apples-to-apples when taking the funds’ underlying exposures into account,” an expert says.
July 17

However, it wasn’t all bad news for benchmark providers. The number of fixed-income indexes grew 7.2% from a year earlier, largely thanks to expansion in Europe, the Middle East and Africa. The region now has almost as many debt gauges as the Americas.

Indexes that reflect ESG also proliferated, with the number of measures expanding almost 14% from a year earlier.

Bloomberg News