Index Providers Report Strong Revenue Growth; What Lies Ahead?
Global index revenues increased 8.0% to reach a record $3.7 billion in 2019 as increases in asset-based fees from ETFs and mutual funds and subscription revenue supported industry growth. Index providers have been thriving in the passive investing environment with industry revenue growth rates over the past three years remaining robust: 16.2% in 2017, 13.7% in 2018 and 8.0% in 2019.
This year presents a new set of challenges for the industry, as index providers react to a myriad of COVID-19 related uncertainties including index rebalancing postponements, fee erosion from asset-based fees and the potential recession. On the heels of the publication of Burton-Taylor’s annual benchmark study of the Index Industry, several index providers have reported first quarter earnings shedding some light on how the industry is faring in this unprecedented environment.
· Nasdaq reported a 35% increase in Index revenues driven by higher licensing revenue from higher average AUM in ETPs linked to its indices, higher licensing revenue from futures trading linked to the Nasdaq-100 Index and a $5 million collection charge from previous period usage.
· S&P Dow Jones Indices revenue increased 20% in the first quarter of 2020 driven by a 59% increase in exchange-traded derivatives and an 11% gain in asset-linked fees.
· MSCI reported a 16.1% revenue increase in the first quarter of 2020. MSCI’s index revenue from exchange traded futures & options contracts more than doubled from $4.1 million in the first quarter of 2019 to $11.0 million in 1Q20.
While these index providers reported strong revenue gains in the period, it is important to note that the COVID-19 pandemic only had a partial impact on the quarter. Second quarter results will paint a fuller picture of the pandemic’s impact on the industry’s financial results.
Index Global Share & Segment Sizing 2020 Report
Burton-Taylor International Consulting is uniquely positioned to provide in-depth analysis of the index provider landscape and recently published its third annual Index Industry Global Share & Segment Sizing 2020 report. This 97-page report includes detailed analysis of the following index providers: Alerian, Bloomberg, CRSP, FTSE Russell, Intercontinental Exchange, Morningstar, MSCI, Nasdaq, Qontigo, S&P Dow Jones Indices, Solactive, SIX, and others. Additionally, the report provides detailed analysis on index industry revenues at the company, segment and industry levels. For more information on this report, please click here.