Editor's Note

Editor's Note
By Journal of Indexes Staff

Related ETFs: ROB

Of Innovators And Fundamentalists

Jim Wiandt

When we started to put this issue together, we'd planned to prominently feature the transcript from our editorial board meeting. This summer's meeting, held at the American Stock Exchange, had a "Thrilla' in Manila" feel to it, with all the leading innovators in the index and ETF business duking it out over the most contentious issues facing the industry today: weighting schemes, coverage, expense ratios, etc.

We figured it would make good copy. In fact, weknew it would make good copy. But it quickly became evident that once the lawyers got their hands on the material and the editing pens came out, our publication would be ... delayed.

All was not lost, though. The meeting served as the inspiration for the theme of this issue and our lead article: Innovation. We figured: Why not let all of the innovators and "the establishment" (whatever that is, since the major players are often driving much of the innovation) respond in their own words to (we hope) probing questions from us? That way, we figured the lawyers could have a go before we even got the material, and by asking the whole industry, we'd have good balance. The result is an extremely interesting series of interviews, some by phone or in person and others in writing, of most of the major players in the index (and index - like) industry.

Following the Innovator feature is a reprise of probably the biggest story in index innovation over the past year-alternative index weighting, and in particular, weighting by fundamental factors. We've provided a sort of Cliff's Notes version of the current debate, with ample quotes from the likes of John Bogle, Burton Malkiel, Jeremy Siegel and Rob Arnott. And as you'll see, if you have not already, it's been a hum-dinger of a debate.

Most of the rest of the September/October 2006 JOI is all about style, perhaps the most contentious area for the "establishment" part of the index industry. Style has become a real hot button issue because the various growth and value indexes are remarkably different from one another, and there's been a lot of change in how we define style. First, Paul Lenz and Michael Dellapa discuss S&P's latest innovation, their "pure style" indexes, which aim to provide targeted style exposure. Next, the erstwhile Bob Waid discusses how the Dow Jones Wilshire style indexes stack up to some of the other offerings on the market, and Kelly Haughton follows up with a witty and insightful review of Russell's index philosophy.

Meanwhile, David Blitzer illuminates an area of index investing that has been one of the touchstones of all of the recent debate: investability. We also introduce something new this issue: a paid feature brought to you by The Bank of New York. It includes an interview with Joe Keenan and a significant excerpt from a very strong ETF panel I recently moderated at The Bank of New York Client Advisory Meeting. The feature includes some great quotes from Jonathan Steinberg of Wisdom Tree, Cliff Weber of the AMEX, Lisa Chen of BGI and the always-entertaining Kevin Ireland from ALPS. Finally ... bringing us home is our own Matt Hougan with a hilariously devastating swipe at Domini for abandoning indexing.

For an index-focused publication, this issue is almost pulsing with controversy. But at its core ... after your tears and your laughter ... it's really just about good times. OK, maybe, you'll learn something too.