The past year saw S&P Dow Jones Indices gain 22 new exchange-traded products listed in Asia, up from 15 the previous year and giving a total of $5.6 billion in assets under management for S&P index-linked funds as of March 2015, a year-on-year increase of $700 million.
The index provider continues to build relationships with exchanges across Asia-Pacific. Its latest deal was signed with the New Zealand Exchange (NZX) in February to jointly develop co-branded indexes featured on NZX platforms. Meanwhile the partnership formed with India's Bombay Stock Exchange (BSE) in 2013 is bearing fruit, with several exchange-traded funds (ETFs) launched based on S&P/BSE Sensex indexes.
The company's wide global reach and strong data provision also allowed fund managers to create products that gave investors in the region more targeted access to US markets at a time when the country has been solidly recovering, while at the same time opening up access to more esoteric areas like Chinese corporate bonds to outside participants.
To this end, GF International Investment Management, a subsidiary of GF Fund Management, listed the first China onshore bond ETF on the New York Stock Exchange in November, based on the S&P China Composite Select Bond Index. Sharon Yang, head of institutional sales and business development at the firm, says the company chose S&P because of its impressive grasp of the domestic bond markets in China.
"We talked to a couple of other global index providers and after a comparison, we figured S&P was a good candidate to work with because it already had a suite of China onshore fixed-income indexes, which was at the frontier for this investment space. The knowledge and understanding of the onshore market is limited among outside professionals," says Yang. "S&P, as far as I know, was ahead of other index providers in terms of getting access to databases in China and understanding onshore fixed-income markets."
She notes the firm had a series of channels for fixed-income indexes, broken down into government bonds, regional bonds and corporate bonds. "At the time, it was the only one with a corporate bond index built," she adds.
In Australia, S&P partnered with State Street Global Advisors to produce the SPDR S&P 500 ETF, available to domestic investors through a cross-listing on the Australian Securities Exchange. ETF Securities, which formed a joint venture with Australia & New Zealand Banking Group in May 2015, launched three equity ETFs on the Australian Securities Exchange tied to S&P indexes. Danny Laidler, co-head of ANZ ETFS, says S&P's flexibility was a welcome factor in helping to construct the products.
"We were able to work with S&P on the index methodology, working with it on making some changes to get an index that we believed could better meet our clients' needs," says Laidler.
"While the S&P 500 High Yield Low Volatility index and the ASX 100 index were already being used, we were the first issuer globally to use the ASX 300 Shareholder Yield Index," he says. "S&P was happy to consider our suggested changes to the index, which is great."
Actively working with ETF providers to make tailor-made products has been increasing in recent years, says Sam Tsui, director, market development, Asia, at S&P Dow Jones Indices.
"We've been working with ETF providers closely. What we've seen in the past couple of years is that previously they would come to us and say: 'You have this index on the shelf. I want to use it to build an ETF.' Now, as the markets are evolving, we work more with the product providers to build the index along a specific strategy."
S&P's broad global reach and deep access to data enables the company to provide exactly what the ETF managers want, says Priscilla Luk, senior director of index research and design at S&P.
"Clients are more detail-oriented than before. For example, if they want a dividend index, it can be a granular analysis, asking if they want a narrow or a broad basket and how they want to weight it," says Luk.
"Our role has been to optimise what we can do for the ETF providers or the asset managers, in the sense that we try to make our offerings more efficient. For example, different exchanges have different tax benefits or different restrictions from regulators. Therefore, we have to understand those aspects before we launch our indexes so they can use the index in their products in a more efficient manner."
S&P's abilities are borne out by the services it has provided in India, working with BSE to update its infrastructure and treading a line between international investor requirements and domestic requirements.
The week on Risk.net, July 7-13, 2018Receive this by email