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Indexing's Manhattan Project
 The index business has become the financial industry's leading source of innovation. With an unprecedented array of alternatively weighted, quantitatively driven and even active indexes covering every conceivable asset class (or sliver of an asset class)-and with index funds, ETFs, futures, options and everything in between tracking those indexes-it's getting hard to tell just what the index industry is anymore.
Indeed, the index business is becoming more active not only in its marketing, but now in its actual shifting methodology, and the lines between active and indexed are becoming more blurry every day. As Don Phillips points out in this issue, that is not necessarily in most investors' best interest.
On the other hand, if you have a good plan and stick to it, the array of tools available today at minimum cost and optimal efficiency has never been better for any purpose, be it pure indexing or the delusional pursuit of rocket-fueled returns. Still, the general move of the index industry toward more volatility and higher expenses, even as the actively managed fund industry seems to move in the opposite direction, is, well, disconcerting
With their explosion in assets and glamorous returns, who wouldn't want to launch an ETF? Well, maybe you. In this issue we tell you how it's done, as ETF pioneer Kathleen Moriarty and Jeff McCarthy explain the process. If you do decide to launch an ETF, just don't expect to get any sleep in the next couple of years. And then there's the part about actually raising assets …
In perfect counterpoint to the "So You Want To Launch An ETF" article, the aforementioned Don Phillips from Morningstar weighs in with the thought that we probably have too many ETFs already, and that what is being launched is definitely raising both the levels of risk and the expenses that ETF investors are accustomed to paying. The data, not surprisingly, suggests that these trends can hit the investor's bottom line. Indeed, let the buyer beware.
Oh, style, what are you? The answer, it seems, is that no one really seems to agree, and the "asset classes" of growth and value are really all over the map, even in the benchmarking industry. Francis Gupta and Paul Demskie discuss these differences of opinion, and more importantly, provide volumes of comparative data for four of the major style index families.
Next up is a sobering commentary on the state of the mutual fund industry. John Bogle bemoans the woeful misalignment of manager and investor interest in the fund industry, and chronicles a shameful array of mutual fund misdeeds and finagling. Following up Mr. Bogle's lucid call to arms is The Professor, John Haslem, with a detailed list of the regulatory and structural changes that need to happen to reform the mutual fund industry and bring fund management into alignment with shareholder interest.
Anchoring the issue is S&P Index Chairman David Blitzer ruminating on the peculiarities of asset allocation percentages, and the Curmudgeon, proposing a merger ETF and speculating on humorous ticker combinations.
That's the summer issue, top to bottom. So pack it in your beach bag, and kick back for a dash of sunshine and some indexing fun.
Jim Wiandt
Editor
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