Morningstar Advisor - December 2013/January 2014 - (Page 52)
Exploring Indexing's Next Frontiers
By Ben Johnson
Two veterans and a relative newcomer discuss the methodologies
and practices that have made their indexes successful.
In October 2012, Vanguard fired the shot heard
around the indexing world. The largest
fund indexing firm on the planet announced
that it was changing the benchmarks for
a number of its funds from MSCI to a mixture
of indexes provided by FTSE and CRSP,
the University of Chicago's Center for Research
in Security Prices.
Vanguard's move illustrates how quickly the
index industry is evolving. Index providers
have moved from methodological convergence
in the market-cap-weighted "bulk beta" corner
52 Morningstar Advisor December/January 2014
of Index Land to exploring the next great
frontiers in areas such as "smart beta," as they
attempt to isolate factors other than market
beta in hopes of generating indexes that
will beat their market-cap-weighted cousins
over the long haul.
Dow Jones Indices; and Raman Subramanian,
executive director of index research at MSCI.
To explore this new era of indexing, I hosted
a panel discussion on Oct. 3 at the 2013
Morningstar ETF Invest Conference. Joining
me were David Barclay, the chief operating
officer of CRSP; Craig Lazzara, the senior
director of index investment strategy for S&P
we've seen a lot of convergence in the
Our conversation has been edited for clarity
Ben Johnson: Over the past few decades,
practices and methodologies used by index
providers. Is there any room left for
differentiation in the traditional cap-weighted
benchmark space? How can you as index
providers differentiate your core products?
Table of Contents for the Digital Edition of Morningstar Advisor - December 2013/January 2014