The firm writes that this suite is designed to cater to a broad base of investors at different stages of their climate (investing) journey.

The firm writes that investors are increasingly seeking sophisticated climate indices that go beyond reducing backward-looking carbon emissions and incorporate forward-looking, multi-dimensional climate metrics. In response, Robeco writes that it has developed advanced climate intellectual property (IP) over the years, such as the Climate Traffic Light to assess a company’s alignment with the Paris Agreement, the SDG framework to identify climate solutions and Climate Beta to evaluate climate transition risk. These metrics are integrated into the indices to varying degrees, depending on the specific climate objectives and risk profiles of each index.

The first index offers a low-tracking error alternative to a passive market-cap weighted index, suitable for climate-conscious investors aiming to mitigate climate risk and support companies aligned with the Paris Agreement while obtaining the equity premium.

The second index targets investors who want to meet the minimum requirements for EU Paris-Aligned Benchmark but are keen to integrate more forward-looking climate metrics and want more exposure to climate solutions providers.

The third index focuses on climate leaders, appealing to investors looking to capitalise on the climate transition by investing in solution providers expected to lead the transition to a low-carbon economy.

The firm writes that integrating client specific preferences in custom indices has always been a core strength of the Robeco Indices team, allowing for bespoke solutions that meet specific investment universes or decarbonisation targets. “The team has developed an index construction algorithm that ensures relatively low turnover and high liquidity compared to other index providers, which is, in particular, crucial for investors coming from passive.”

Joop Huij, Head of Robeco Indices, says: “We’re excited to launch this climate index family to offer investors a more nuanced approach to climate index investing, compared to carbon emissions’ focussed indices. Our index construction approach takes turnover and liquidity into account to provide highly investable indices. We welcome an active dialogue with clients to develop custom indices that align with their climate and financial goals.”

Lucian Peppelenbos, Climate Strategist, says: “We decided years ago to not only focus on carbon emissions data when looking at climate investing. We invested in resources to also evaluate other climate characteristics of companies such as their alignment with the Paris Agreement, whether companies provide solutions to lower the world’s future emissions and their level of climate transition risk. We have developed these metrics in-house and integrate them into our investment solutions. It’s great that our climate IP is now being made available to an even larger group of investors.”

The association writes that the newly launched classification framework offers investment firms a tool to better communicate index-based products to clients by describing index-based strategies according to their level of active decision making. It proposes a framework of indexing along a spectrum of strategies beyond traditional market capitalisation weighting.

The framework is based upon three dimensions of strategy, sources of returns, and level of discretion, with the goal of increasing transparency among index-based investment products.

 Accompanying policy recommendations emphasise the importance of transparency and clear disclosures around the active investment decisions involved in index-based products.

Rhodri Preece, CFA, Senior Head of Research, CFA Institute says: “The notion of a simple bifurcation between active and passive investment products is outdated. Index-based strategies are varied in their design features and involve different layers of active decision-making, dispelling the historical distinction between active and passive management. As index-based products have proliferated, incorporating more complex features than market capitalization weighting, there is a need for greater transparency and improved investor comprehension of these strategies. This new framework intends to support investment advisers and end-investors through clearer disclosure and communication of the key features of index-based products.”

The research includes recommendations for investment firms grounded in the principles of improved disclosures for clients, including:

 Educate and inform investors of the active decisions made throughout the investment process for index-based investments. 

Communicate to investors about the decision-making processes involved in index fund creation, including security selection and weighting methodologies used in the creation of the investment product or strategy.

Provide prospective clients with access to more detailed information on index product features as part of the pre-sale product literature.

The MSCI Private Capital Indexes meet these investor needs, the firm says, building upon MSCI’s independence and expertise in driving transparency and introducing robust data and solutions across asset classes.

The Indexes, constructed from a broad universe of private capital funds with over USD11 trillion in capitalisation, leverage MSCI’s transparent methodologies and reputation for rigorously verified data. Encompassing private equity, private credit, private real estate, private infrastructure, and private natural resources, these 130 Indexes complement MSCI’s over 80 existing real asset fund and property indexes providing investors with a comprehensive view of global private markets and the full risk spectrum of private real asset investing. Coupled with MSCI’s suite of equity and fixed-income indexes, the firm writes that these private capital indexes offer a multi-asset perspective for investors across their portfolios.

Institutional investors can leverage these Indexes to meet their unique investment mandates and achieve long-term financial goals, while detailed insights from these Indexes can enable strategic asset allocation for asset owners.

Henry Fernandez, Chairman and CEO of MSCI, says: “Investors need tools that will help them cut through the complexity of private markets and take advantage of new investment opportunities. Our private capital indexes allow investors to gain clarity across their investments through high quality validated data and industry leading index construction.”

 The new study provides a comprehensive analysis of the index industry with detailed reviews of leading index providers, including LSEG FTSE Russell, S&P Dow Jones Indices, MSCI, Nasdaq, ISS STOXX, Bloomberg, Alerian, ICE, Solactive, Morningstar, CRSP, and SIX.

Index industry revenues increased across all segments in 2023, with asset-based fees rising 11.1 per cent annually over the last five years, representing 49 per cent of total and subscription fee revenues. The remaining index revenues comprise non-recurring transaction revenue and revenue from index licensing for use with derivatives, OTC contracts, and structured products. Higher AUM in ETPs drove growth for most providers, specifically those generating the most revenues from asset-based fees.

Key findings in the study include:

MSCI, S&P Dow Jones Indices, and LSEG FTSE Russell account for more than 70 per cent of total index revenue.

Assets under management in ETFs rose by 26 per cent to USD11.4 trillion.

Investments continue to flow into Fixed Income, ESG and thematic funds, but traditional equity indices still capture two of every three dollars earned by providers.

“Fixed Income indices rebounded in 2023, leading annual segment growth at 16.1 per cent. Yet, targeted indices, led largely by sustainable themes related to ESG, capitalise on investors’ desire for exposure to more specific slices of the market had the fastest annual growth at 22.7 per cent over the last five years, and will continue to have a positive impact on index future industry revenues,” says Brad Bailey, Research Director at Burton Taylor. “Indexation continues to grow in a variety of market conditions and speaks to the innovation in the types of index choices that institutional and retail investors have today.”

The firms writes that this novel index offers exposure to North American-focused buyout funds by mirroring their performances with publicly listed securities from the Solactive GBS United States 500 universe. It is aligned with the industry distribution of Net Asset Values (NAV) of Private Equity (PE) investments at a deal/portfolio company level in the respective market. 

Timo Pfeiffer, Chief Markets Officer at Solactive, says: “We are thrilled to collaborate with CEPRES on this first of many ventures, capitalising on their expertise in private equity data networks alongside our proficiency in index creation to introduce this pioneering product.”

Dr. Daniel Schmidt, CEO of CEPRES, says: “With our expansive data network covering global private equity markets, we have the means to accurately gauge performance and risks. Teaming up with Solactive on this endeavour combines our knowledge in private equity with their prowess in index construction, resulting in a highly valuable offering for investors.”

The SRI equity portfolio invests in a range of Amundi SRI PAB equity funds, which track MSCI SRI Filtered PAB regional indices. The indices’ methodology focuses on the top 25 per cent ESG-rated companies relative to their sector peers and adopts a wide range of systematic environmental- and social-based exclusions, also excluding companies generating revenue from thermal coal mining or oil and gas extraction. Additionally, they are aligned with the EU Paris-Aligned Benchmark (PAB) regulation minimum requirements, including:

A reduction in carbon intensity by 50 per cent, compared to the underlying investment universe;

A reduction in carbon intensity by 7 per cent on an annualised basis.

The SRI bond element invests in two bond funds managed by Northern Trust Asset Management, which track Solactive Global Bond ESG Climate indices. These are focused on a global investment grade bond universe that is screened for ESG scores and carbon emissions, including targeting a 50 per cent reduction in corporate bond carbon intensity compared to the parent index.

The range includes five portfolios, ranging from 100 per cent equity to 20 per cent equity allocations, with each portfolio invested across a range of regional equity funds and/or two fixed income funds. Risk in the SRI bond element is reduced by blending the two fixed income funds to target a shorter duration than the wider market.

ebi’s Investment Product Manager, Jonathan Griffiths, CFA, says: “We know that investors seek to invest in line with their values, while also seeking competitively priced investment solutions. With the launch of our SRI portfolios, we are in the sweet spot where these two elements align. Providing enhanced ESG screening, and market-leading equity exposure aligned with the EU Paris-Aligned Benchmark minimum requirements, these portfolios are an exciting addition to our product suite and the wider MPS space.”

Ashkan Daghestani, Head of ETF, Indexing, and Smart Beta Sales for UK & Ireland at Amundi, says: “We are pleased to be selected by ebi, which will enable more and more UK investors to have access to our low-cost SRI index-based solutions. This partnership demonstrates our commitment to meeting the needs of UK investors, in particular for ESG index solutions at competitive pricing.”

JAKOTA Index Portfolios Inc writes that its mission is to facilitate for international investors the allocation of capital and tracking of their investment in the JAKOTA region’s capital markets, and for JAKOTA’s listed companies (constituents of the JAKOTA indices) to communicate with the international investment community in a modern and highly engaging way.

JAKOTA Index Portfolios Inc. is backed by a diverse group of international investors led by the Lisbon-based digital media investor Nobias Media and UK-based strategy and research consultancy Oxford Metrica, with several international and JAKOTA-based strategic and financial partners also participating, including Digital Domain Global AI lab and JAKOTA Taiwan Capital Partners.

JAKOTA Index Portfolios Inc writes that it is a niche financial media business that seeks to capitalise on the anticipated accelerated growth and overperformance of JAKOTA markets in the coming decade. Japan, South Korea, and Taiwan R.O.C. are clustered together into the JAKOTA region, the brand coined by the founders of JAKOTA Index Portfolios Inc. to symbolise investment grade, democratic and globally competitive nations that are the home to 200 million people with some of the best education, public safety and living standards. 

The firm writes that, for a long time in the shadow of the other developed economies, the JAKOTA region is in a unique position today to secure intellectual, technological, and economic leadership for years to come as the global order is in flux and the economic center of gravity is consistently moving towards Asia.

“We at Oxford Metrica have been working extensively in the JAKOTA region for the last two decades. Consequently, we have developed deep insights from our extensive network. We are convinced that several change factors have converged, from geopolitics to technology, that place JAKOTA at the heart of global economic growth and innovation. We believe that the next decade will see above average returns from this region as it attracts an increasing share of the global investor’s capital allocations. The region exports a staggering USD1.5 trillion a year and holds foreign reserves in excess of USD2.2 trillion, placing it second only to China on these two metrics”, says Dr Rory Knight, Co-Founder of JAKOTA Index Portfolios Inc.

Expanded Benchmark Pricing. The firms aim to provide next-generation pricing across a broader range of fixed income securities, which will be administered by FTSE Russell as benchmarks. Expanding their existing collaboration on benchmark pricing for UK Gilt and European Government bonds, the objective is to deliver robust, algorithmic, and reliable pricing. The closing prices amalgamate trading activity from Tradeweb’s electronic platform, enabling closer alignment with actual trading levels and intraday pricing. These prices are administered in accordance with the EU and UK Benchmark Regulation and the IOSCO Principles for Financial Benchmarks and can be used as reference rates for a broad range of use cases including trade-at-close transactions and derivatives contracts.

Broad Index Inclusion. In the coming months, Tradeweb and FTSE Russell write that they will continue to collaborate on fixed income pricing sets to extend coverage across multiple regions and fixed income asset classes. Over time, FTSE Russell will explore incorporating Tradeweb pricing into FTSE Fixed Income indices, starting with FTSE World Government Bond Index (WGBI), a flagship index comprised of sovereign debt from over 20 countries and denominated in a variety of currencies.

Enhanced Trading Functionality. Tradeweb seeks to expand and enhance electronic trading functionality for FTSE Russell Fixed Income indices and customised baskets through tools and protocols such as RFQ (request-for-quote), AiEX (Automated Intelligent Execution tool) and Portfolio Trading, offering trade-at-market close, trade-at-month-end and other features conducive to index rebalancing trades. For clients seeking to efficiently express a view on FTSE Russell indices and baskets, providing enhanced trading functionality can help efficiently manage what are often their largest and most critical trades.

Lisa Schirf, Global Head of Data & Analytics at Tradeweb, says: “Tradeweb’s collaboration with FTSE Russell will provide clients with verified benchmarks they can use as reliable closing prices for their end-of-day trading strategies and other purposes. The Tradeweb FTSE closing prices will create a foundation across global Fixed Income markets for consistent end-of-day and intraday prices and is another way we are investing in the electronification of the markets.”

Scott Harman, Head of Fixed Income Indices at FTSE Russell, says: “With our comprehensive suite of sophisticated Fixed Income Indices and a growing need for innovative pricing solutions from our clients, our deeper collaboration with Tradeweb will enable us to bring to market greater tractability and tradability of our indices. We are very excited by the opportunity this relationship will bring and how it has the potential to fundamentally change the Fixed Income ecosystem.”

Trusted reference price data is critical for financial firms to manage investment portfolios, evaluate the fair value of securities, perform compliance, and satisfy general accounting standards, the firms say. Tradeweb and FTSE recently launched benchmark closing prices for European Government Bonds in May 2023, expanding on Tradeweb’s well-established UK Gilt Closing Prices. Administered in accordance with the EU and UK Benchmark Regulation and the IOSCO Principles for Financial Benchmarks, Tradeweb FTSE Euro Government Bond Closing Prices are available from Tradeweb and provide end-of-day reference prices for Euro-denominated nominal bonds issued by Austria, Belgium, Finland, European Union, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal and Spain.

Green bond proceeds can only be used for sustainable objectives, for example, supporting climate-related or environmental projects such as renewable energy, clean transportation, or sustainable water management. 

While the parent index already excludes controversial weapons and thermal coal, the new index considers investors’ sustainability preferences, applying broader exclusions of conventional weapons, civilian firearms, tobacco, alcohol, oil sands, and Arctic oil. The index also excludes issuers with an MSCI ESG rating below BBB or an MSCI ESG Controversy score of zero; furthermore, it filters out bonds with maturities over 10 years and applies a three per cent issuer cap to improve diversification.

The new ETF is aligned with Article 8 of the European Union’s Sustainable Finance Disclosure Regulation (SFDR).

Clemens Reuter, Global Head of ETF & Index Fund Client Coverage at UBS Asset Management comments: “Investors are increasingly seeking innovative solutions to help meet a range of climate and sustainability needs. This ETF enables investors to gain global exposure to green bonds with environmental benefits – while also considering the ESG profile of the underlying issuers.”

The UBS (Lux) Fund Solutions – Global Green Bond ESG 1–10 UCITS ETF is available unhedged in USD as well as in a EUR hedged version. It is passively managed and listed across key European exchanges, including Xetra, Borsa Italiana, and SIX Swiss Exchange.

The firm writes that the “index-linked investments” market, valued at USD17 trillion today, is evolving rapidly with assets expected to reach USD30 trillion by 2027.  This growth continues to accelerate demand for customisation, flexibility, scale and speed to market, driving the transformation of traditional passive investing and raising the need for state-of-the-art technology and computational capabilities, the firm says.       

MerQube’s cloud native SaaS platform and API-first solutions are designed and built to address and unlock this unmet demand, the firm writes, adding that its data ingestion framework and building block approach creates the unique computational agility required to process extensive amounts of data from a vast array of sources, and deliver cost-effective, rapidly implemented solutions.

“We are thrilled to welcome Intel Capital and Allianz Life Ventures as investors”, says Vinit Srivastava, CEO at MerQube.  “The support of a leading technology V.C. firm such as Intel Capital will be instrumental as we deliver on our vision to close the fintech gap in passive investing by providing the best technology available to enable innovative rules-based investment solutions.  The participation of a powerhouse such as Allianz Life Ventures will provide strategic direction in the insurance market as we continue to expand to meet the needs of a diverse client base.” 

“The surging market demand for sophisticated tailored indices can be effectively delivered by a cloud-based and API-centric architecture,” says Sunil Kurkure, Managing Director at Intel Capital. “We believe the next wave of innovation in rules-based investing will be driven by customization at scale to meet diverse investor requirements and drive cost efficiency. MerQube’s technology puts it in a unique position to deliver the solutions this trend will require.  Intel Capital is delighted to collaborate with MerQube on this next phase of their journey.”

In May 2023, MerQube received FCA authorisation under Benchmarks Regulation (BMR) and in September 2022, it confirmed its adherence to International Organization of Securities Commissions (IOSCO) principles for Financial Benchmarks. MerQube’s other recent accomplishments have included assuming calculation and administration services for the UBS CMCI index family, a family of 1,100+ of UBS’s most innovative commodity indices. MerQube is also the benchmark provider for most of the defined outcome ETFs issued in the USA.                            

MerQube plans to utilise the funds raised to further expand its engineering capabilities and platform infrastructure, scale its talent, and continue to expand into its key markets.

In January, 2020, Vinit Srivastava, co-founder of MerQube, was interviewed for an ETF Express ETF Innovators’ piece: MerQube: Challenging the status quo