Market Overview

ETFs Are Big Business For Index Providers

ETFs Are Big Business For Index Providers

Shares of Msci Inc (NYSE: MSCI), one of the largest providers of indexes for use with exchange traded funds, are up an impressive 17.6 percent year-to-date, a move aided by a jaw-dropping 12 percent surge over the past week.

MSCI's relationships with various ETF providers are paying dividends. At the end of January, equity ETFs tracking MSCI indexes had a combined $511 billion in assets under management, good for year-over-year growth of 28 percent, according to the New York-based index provider.

Looking Globally

On a global basis, there are now more than 900 ETFs tracking MSCI indexes, meaning MSCI provides indexes to more equity ETFs than any other index shop.

Emerging markets equities remain fertile ground for MSCI indexes, thanks in large part to ETFs such as the iShares MSCI Emerging Markets ETF (NYSE: EEM), iShares Core MSCI Emerging Markets ETF and scores of single-country ETFs. EEM is the second-largest emerging markets ETF in the U.S. and IEMG is a fast-growing, cost-efficient alternative to the institutionally popular EEM.

Smart Beta And Asset Influx

The influx of assets to smart beta, or fundamentally-weighted ETFs is also benefiting MSCI.

“Overall, assets in ETFs linked to MSCI’s factor indexes reached $53 billion globally, as of January 27, 2017. ETF assets linked to MSCI indexes are one component of the more than $10 trillion in assets under management benchmarked to MSCI’s indexes worldwide,” said MSCI.

Popular smart beta ETFs tracking MSCI benchmarks include the $12 billion iShares Edge MSCI Min Vol USA ETF (NYSE: USMV) and the $5.9 billion iShares Edge MSCI Min Vol EAFE ETF (NYSE: EFAV).

Recent Performance

As of Jan. 27, assets in equity ETFs tracking MSCI indexes climbed nearly $30 billion, $12 billion of which was new inflows and $17 billion of which was attributable to market appreciation, according to the index provider.

In addition to BlackRock Inc.'s (NYSE: BLK) iShares unit, the world's largest ETF issuer, providers using MSCI indexes for ETFs include State Street, Fidelity, Deutsche Asset Management, Amundi, Lyxor and Liffe, among others.

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