FTSE: ETF indexing evolution

Tony Raw managing director, global sales at FTSE talks to Clare Dickinson about how the indexing business has developed

The indexing business at FTSE has come a long way since April 2000 when the iShares FTSE 100 ETF became the first ETF to be listed on the London Stock Exchange.

When Tony Raw joined the company in 2007 indices were still typically long-only, single asset class affairs. Since then the art of indexing has undergone a huge transformation.

Raw began his career on the trading and institutional brokerage floors at investment banks in London and New York. After that he had roles at Reuters and Thompson; “when they opted for the merge I opted to look at other opportunities. I looked at where the growth in the market place was and I could see it was definitely in indices,” he says.

He started his work at FTSE as deputy managing director for Middle East and Africa before proceeding to managing director. In January this year he moved to his current position.  

During his time at the company, there have been changes in both index construction and the way the company works alongside academics and other players in the passive investment industry, including ETF providers.

“When I joined, FTSE was continuing to build partnerships with regional exchanges as well as some key academic houses like Research Affiliates and [Global Wealth Advisors],” says Raw. “Those partners number in the dozen plus now.”

The partnerships have enabled FTSE to “move from traditional, long only, single asset class indices to offering a multitude of indices covering a greater range of different asset classes with exposure to more countries which embed different investment strategies”.

This could be indices based on fundamentals, such as the FTSE Rafi index series, which selects constituents based on criteria such as cash flows, total sales and gross dividends or the FTSE Edhec Risk Efficient series, which aims to increase the Sharpe ratio by selecting constituents with the most efficient risk-to-reward ratio.  

 

Customise
The index provider has also seen huge growth in its custom index business. “If the indices don’t fit a particular need of a client, what is it they do want? How do they want it tailored? We have been developing our research, custom and quant teams so that our teams can work with any clients.” That can be anyone from the asset owners which want to allocate mandates to replicate the index but have particular rules they want to apply, “all the way to an ETF issuer which wants to list an ETF and they feel they will get greater investment attraction if they have that core index customised in some way.”