The push to offer the best value and lowest pricing continues to shape not only the exchange-traded fund (ETF) space but also those that serve it, including benchmark providers. Last week, Vanguard, the U.S.-based ETF and mutual fund giant, announced it had dropped MSCI Inc. as its equity index provider for its ETFs and has instead picked up a set of new benchmarks from FTSE Group and the University of Chicago’s Center for Research in Security Prices (CRSP).
Is Vanguard’s move the first tipping domino in what could be a rush to low-cost benchmark providers? Could be, especially as the pricing war between ETF providers heats up. Indeed, analysts who follow MSCI Inc. told Reuters last week that they’re worried others could follow suit, notably BlackRock, the firm’s single biggest licensing customer. While BlackRock’s CEO also denied any intention to shift providers, there could be new pressure for MSCI to reduce fees down the road.
One thing is clear: Vanguard’s move is a boon for the University of Chicago’s Booth School of Business, which has been thrust squarely into the benchmarking game with its first big-time customer. It’s also opened up some new possibilities for emerging benchmark providers able to offer transparency and accuracy at the lowest possible cost.
Of note as well: Vanguard is transitioning four TSX-listed ETFs to FTSE and CRSP benchmarks. They’ll be renamed as follows:
- the Vanguard MSCI Canada Index ETF will be called the Vanguard FTSE Canada Index ETF;
- the Vanguard MSCI U.S. Broad Market Index ETF (CAD-hedged) will be renamed the Vanguard CRSP U.S. Total Market Index ETF (CAD-hedged);
- the Vanguard MSCI EAFE Index ETF (CAD-hedged) will change to the Vanguard FTSE Developed ex North America Index ETF (CAD-hedged); and
- the Vanguard MSCI Emerging Markets Index ETF will be renamed the Vanguard FTSE Emerging Markets Index ETF.