A surge in demand for fixed income exchange traded funds looks set to turn bloomberg into one of the top three index providers in terms of etf assets tracking its benchmarks.
The company, which is still best known for its flagship news and information terminals, enjoyed the strongest asset growth of all index providers last year, with etfs benchmarked to its indices attracting net inflows of $126bn, according to data from etfgi, a consultancy.
This was enough to place it comfortably ahead of the $87bn of fresh money run against msci indices, and the $80bn inflow of s&p dow jones.
Bloomberg extended its lead in terms of flows still further in the first eight months of this year, with assets rising by another $90bn.
This was way ahead of the combined $32bn of fresh money benchmarked against the three industry leaders, s&p dow jones, msci and ftse russell, that have traditionally held sway as the index groups that the vast bulk of the $7tn exchange traded fund industry benchmarks its products against.
Bloombergs rise in importance comes as rapid growth in passive investing is increasing the importance of index providers, with an 8 per cent jump taking global index industry revenues to a record $3.7bn last year, according to analysts at burton-taylor international consulting, an arm of tp icap. s&p, msci and ftse russell took $2.6bn of this.
The 530 etfs managed against bloomberg indices now hold $725bn, according to etfgi, giving the group a 10.4 per cent market share and placing it just a whisker behind the $731bn of ftse russell. s&p dj remains comfortably in first place, with assets of $1.8tn, a 25.9 per cent market share, with msci in second at $938m, or 13.4 per cent.
Bloombergs rise has primarily been driven by the index benchmarking business it bought from barclays for 520m in 2015, although steve berkley, global head of fixed income indices at bloomberg, said plenty of etfs were now run against the australian bond indexing business it acquired from ubs in 2014.
Fixed income accounted for 79.2 per cent of bloombergs index assets last year, according to burton-taylor.
This has allowed bloomberg to be a prime beneficiary of rapid growth in bond etfs. so far this year, fixed income etfs have taken in a net $161bn of inflows, outstripping the $138bn swallowed by equity funds, according to etfgi, despite accounting for less than 20 per cent of the etf industry.
In some sense we are fighting with one arm tied behind our backs. our growth and products have been more focused on fixed income, but with the launch of our us equity family in september last year, and with both developed and emerging markets upcoming, we hope to grow our assets there, said mr berkley.
Any expansion could prove lucrative, with bloombergs index revenue hitting $133m last year, according to burton-taylor, with an estimated 85 per cent of this derived from asset-based fees, and 15 per cent from subscriptions. fund managers typically either pay a flat licence fee to benchmark against an index or, more commonly, a small fee per $1m of assets.
The thing that gets us very excited are multi-asset class products, combining fixed income and equity with commodities gives us the ability to put forth really innovative solutions, mr berkley said.
Bloomberg aside, this year has seen a wider shake-up of the indexing sector, with the industry heavyweights outshone by a series of relative minnows that have cashed in on the dominant trends, the etfgi data show.
The second-highest rise in funds benchmarked to a providers indices have been secured by the london bullion market association, at $49bn, thanks to a rush into gold etfs.
Next, at $44bn, comes the tokyo stock exchange, which has been the prime beneficiary of the bank of japan doubling the pace of its equity etf buying spree in response to the covid-19 pandemic.
Markit, with inflows of $37bn, has been another beneficiary of the fixed income surge, while the demand for us technology stocks has seen etfs benchmarked against nasdaq indices accumulate $33bn.
The korea exchange, wisdomtree and jpmorgan have seen small outflows, however, while among the big three, msci took in just a net $8.4bn in the first eight months of the year and ftse russell $1.1bn.