Worldwide internally managed index assets remained relatively flat for the year ended June 30, up just 1.8% to $6.17 trillion, according to Pensions & Investments' annual survey of managers of indexed assets.
The slight bump is a stark contrast to the previous year, which saw a 25% surge in worldwide indexed assets, but the total is still well above the previous high of $5.65 trillion at the end of 2007.
“My sense is that interest in market cap indices might not be growing dramatically, but it certainly is not shrinking,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, New York. “Indexing is definitely still alive and well.”
The ranking of the largest managers of indexed assets once again was unchanged for the year: New York-based BlackRock Inc. led the pack with $2.038 trillion, a 0.9% gain from a year earlier, followed by Boston-based State Street Global Advisors with $1.377 trillion, a 7% decrease.
For the year ended June 30, the Russell 3000 index returned 3.84%; the Barclays Capital U.S. Government/Credit index, 8.79%; the Morgan Stanley Capital International Europe Australasia Far East index, -16.67%; and the Citigroup Non-U.S. World Government Bond index, 0.44%.
Even though worldwide indexed assets were flat, indexing is still attractive over active management, said Lynn Blake, SSgA's chief investment officer of global equity beta solutions.
“The environment has been very difficult in active management,” Ms. Blake said. “Investing in passive or indexed vehicles is cheaper, and I think that's very attractive in this environment where the expectation is a low-return environment, so clients want to minimize cost.”
In addition to cheaper fees, Ms. Blake also pointed to liquidity, predictability and transparency as reasons institutions have been attracted to index strategies in the past several years. Ease of trading is another reason index strategies are appealing, she added.
Among the 60 managers surveyed, $2.749 trillion was managed internally in U.S. equity, up 6.9% from the 63 managers in the previous survey, while $1.737 trillion was managed in international and global equity, down 6% from the international equity assets of the previous year.
“We've seen some increased interest in global markets, but it's starting to fade. European economies are in a mess,” Mr. Blitzer said. “I think the international stuff goes up and down depending on the perception of the markets. My guess is you'll get some flow back into the U.S.”