Index firms race to deliver fast thematic indices

Index providers are racing to produce custom thematic indices on demand for asset managers, ETF issuers and retail investors. Speed and the ability to deliver index data across multiple channels have become key competitive factors.

Asset managers launching ETFs and structured products increasingly want unique strategies to attract investors. Recent themes include companies supplying infrastructure for the data-centre boom and firms expected to benefit from renewed clean-energy investment in Europe. News events and policy changes can create sudden investor interest in particular sectors or groups of companies.

Index firms report pressure to turn ideas into functioning indices in days or weeks rather than months. An unexpected fiscal or monetary announcement can trigger demand almost overnight, and providers that can design, test and distribute an index quickly allow issuers to reach the market while investor interest is high.

Delivery requirements have grown more complex. Some clients need an index displayed on a website, others require a real-time data feed, a CSV file or delivery through a specific market-data vendor. Dr Christian Bahr, Head Index Services at SIX, wrote that “it is no good creating a clever thematic index quickly if the processes behind it cannot reliably support it once it becomes a real investment product.” Distribution, format support and ongoing maintenance are part of the operational work once an index becomes the basis for an investment product.

Major branded benchmarks continue to attract large amounts of tracking capital, but the market for customised strategies creates openings for other index firms. Providers with flexible technology and robust infrastructure can compete for business by converting an investment idea into a usable index and supplying it through the channels the client requires.

Retail interest in thematic strategies has lengthened the product chain: investor enthusiasm leads product manufacturers to package ideas, an index is created, and then an ETF or structured product is built. Each step introduces timing and operational demands, and many indices now sit within production lines of data feeds, distribution systems and maintenance processes rather than existing only as public benchmarks.

Index providers now combine rapid index engineering with dependable delivery systems so numerical indices can be incorporated into functioning financial products that meet issuers’ technical and timing needs.