What is an Index Provider?
Index Providers are companies that create, calculate, and manage indexes to support all types of investment needs. Examples include MSCI, S&P and more.
Index Providers are companies that create, calculate and manage indexes to support all types of investment needs. They have the responsibility of setting the rules that determine which securities to include in each index, how the index will be managed, and how securities will be added or removed from that index over time creating a benchmark for those that track and follow it.
Indexes are abstract constructs that are actually not implemented by index providers; investors cannot invest directly into them. Instead, investors access indexes through funds that are licensed to use them. Index providers license the rights to use their designs and calculations (indexes) to fund providers, such as ETF Issuers, who can then use them to create index-tracking ETFs, otherwise known as passive ETFs. The objective of these ETFs is to track the index provider’s index as closely as possible.
Examples of Index Providers:
- MSCI
- Standard & Poors (S&P)
- Dow Jones
- Nasdaq
- FTSE Russell
- Solactive
- Morningstar
Did you know?
The first index – the Dow Jones Transportation Average - was created in 1884 to measure the average performance of railroad stocks in the US.
This article was written in collaboration with Trackinsight.
