For the investing public, the business of indexing has always been a bit like the wizard behind the curtain. People see the Dow on the evening news, and a flurry of other indexes ticking across their screens. They buy SPDRs and iShares and a host of other index products and index funds, but the mysteries of how everyone gets paid and what drives the business and new products are unknown.
Indeed, the rapid evolution of the index industry has seen the emergence of some very different business models, with some index providers heavily dependent on licensing revenues, others driven largely by data sales or customized index sales, and still others driven primarily by trading-related revenues. In this issue, we pull back the curtain and take a look at some of the questions facing the business of indexing.
Leading off the publication, we talk to some of the leading managers at the major index providers about their own businesses and what is driving change in the industry. On the same theme, Heather Bell takes a look at the relatively recent phenomenon of boutique index shops, some of which have been very successful. Matt Hougan, also from our team, takes a look at the dynamics driving the recent purchase of Dow Jones Indexes by the CME, and David Blitzer gives his own view of the evolution of the index business.
Part II of the current issue focuses on commodities. Satch Chada of Jefferies Asset Management, LLC discusses the difficulties of getting exposure to spot commodities prices … and proposes a possible solution. Adam Dunsby and Kurt Nelson of SummerHaven Investment Management talk about the flaws of current commodity indexes, and propose a better way forward for commodity investors. We’ve also got a nice piece from ETF Securities’ Nik Bienkowski on contango and the oil futures curve, an issue of late that has baffled and surprised some novices to the space who have dipped their toes in oil futures-based exchange-traded products.
Add to this some back-page laughter from Dave Nadig and you’ve got a timely issue on some of the more interesting topics in and around the index industry.
Jim Wiandt
Editor
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