The battleground for institutional investors is centered on the big, well-known indexes. Russell's new advertising campaign, dubbed "Follow the leader," highlights the fact that its benchmark Russell 1000 included several of today's blue chips — Microsoft Corp., Starbucks and Amazon.com Inc. — long before the S&P 500. In fact, Amazon is still not in the S&P 500.
"This campaign is targeted toward the institutional investor," said Russell's Mr. Grieger. "What we wanted to do is use this season — June is the time we refresh the indexes — to highlight the virtues of the Russell index family."
He declined to say how much Russell was spending on the advertising and marketing program, which is scheduled to run through the summer and includes advertisements in trade publications such as Pensions & Investments as well as a highly targeted direct mail campaign.
Lynn Cohn, a spokeswoman at S&P, said her firm launched a new advertising campaign around its indexes about four months ago and has no plans to react directly to the Russell campaign.
In its advertising campaign, Russell makes note of its annual reconstitution, in which the company reviews the top 3,000 capitalized stocks and makes additions and subtractions.
"Once a year we let the market tell us which companies should be in the index and which should be moved out," Mr. Grieger said. "We think that is the right way to do it."
Gregg Buckalew, senior vice president and head of the investment consulting practice at Clark Consulting in Atlanta, said, however, that index creation and reconstitution are areas in which the index companies have fallen short.
"A market index really should represent the pool of securities that active managers draw from," he said. "Traditional index builders have not done a great job with that and a lot is due to the technology that limited their capabilities."
He said relatively new U.S. market indexes created by Morgan Stanley Capital International Inc., New York, appear to have tackled that problem.
"They've taken advantage of technology to put in a structural means for avoiding bias and really coming up with the pure objective for a market benchmark index," he said. "So it's a pool of securities that really does replicate what active managers are drawing from. They developed the capability in the '90s not only to construct indexes but operate them on a real-time basis," which helps avoid major disturbances around reconstituting the indexes.
MSCI, which is a leader in global securities indexes, launched its U.S. indexes last year and quickly lured mutual fund giant Vanguard Group Inc., Malvern, Pa., to use them.
Mr. Buckalew said he has not yet used any of MSCI's U.S. indexes, "I'm trying to work them in."
To counter some of the charges that S&P's methodology is a drawback, the company late last year acquired Citigroup's global benchmark indexes. The S&P/Citigroup indexes are reconstituted annually based on market cap.
"By our acquisition of Citigroup indexes, we made a clear statement to Russell and MSCI that we're interested in eating your lunch," Mr. Blitzer said, adding that the ongoing trend in the index business is likely to be just that.
"I think there are two or three trends that stand out and the first is that increasingly we are all going after each other's turf," he said.
The other trends are an increasing move to provide global indexes and developing custom indexes, he said.
"We want to have an index for every use," he said.