mast image

Special Report

Impact investing

Sections

S&P broadens out

Eudald Canadell, who runs the European index operation for Standard & Poor’s has decided views on many things, including the recent purchase after protracted negotiations of the equity indices business of Citigroup, the former Salomon Smith Barney products.
In one swoop, S&P broadened its offering from a being a major provider of tradable indices, to having a full service with the broad market indices that Citigroup had covering over 7,500 companies in 52 markets, with its pioneering free float-adjusted approach.
For him one of the most interesting aspect is the delicate but task of integrating the two business under the S&P/Citigroup Global Equity Indices label in Europe. “All of us are now working for a company that offers everything from benchmark to investible indices, as well as those for hedge funds.”
The two existing products lines from Citigroup and S&P will maintain their own identities. So S&P’s existing indices, such as the S&P500 and those making up the S&P Global 1200 will not be affected, and by the same token no changes are envisaged for S&P/Citigroup index methodology.
“Going forward the 1,200 series, including the S&P 500, will constitute the basis of our investible indices, while the S&P / Citigroup will constitute the basis of our benchmark indices,” he says.
But there will be one marketing and sales operation, he points out. “I expect this integration to happen in a relatively short time.” He insists this will be in a seamless way with no risks whatever of things not being done properly. “We have to ensure that the users of the Citigroup indices will obtain the same level and quality of service as before.”
There is no danger whatsoever on the product side of any of the indices not being available, says Canadell. On the contrary, overtime there will be an expansion of both the benchmark and the investible indices, since there is no overlap between the two.
“In the near future, the only visible change is the transition of the S&P/Citigroup Indices to the Clobal Industry Classification Standard (GICS), which is something you would expect for coherency.” But nothing is being done to ruffle any feathers here as, the present classification will be maintained for existing clients. “Over time, there may also be small adjustments needed that to benefit clients, for example, timing of annual reviews and so on.”
Another move, but only when the circumstances are right, will be to migrate Citigroup to the S&P technology, which Canadell regards as a very powerful platform. “But up to that point, both systems will be in place,” he says.
The Citigroup has over 300 users worldwide, including consultants; the European users number more than 100. “I think that is very good base, mainly among asset managers, but also some pension funds,” he says.
“We regard it as a product that has been very well developed, so our main challenge will be to make it known that we now have these available. And we will be able to do it at a price that is substantially below that of our competitors,” says Canadell. The main competitor in his sights will be MSCI.
While S&P has made some revenues from data sales in Europe, predominantly its income has come from licensing for indexed products and so on. So a new revenue stream has become available to the business. “We see this new benchmark departure, as being complementary to what we have been doing, so the two business models will go very well together.”
He also pointed to the possibilities for “semi-customisation”. “This could be an off the shelf approach using the benchmark indices in a more defined than the broad benchmark.”
One difference, Canadell points to is that the S&P has traditionally run their indices through committees deciding on index composition, while the Citi products are rules based. “We will preserve this, as for this market with a broad index the rules basis will work well, as it is not like the investible indices, where there is a big emphasis on what is going in and out of the index.”

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2558

    Asset class: Private Equity.
    Asset region: Global or Swiss.
    Size: USD $5-10m.
    Closing date: 2019-08-20.

  • QN-2559

    Asset class: Multi Assets.
    Asset region: -.
    Size: EUR 15m (may be split into two mandates EUR 7.5m).
    Closing date: 2019-09-06.

  • QN-2560

    Asset class: Private Equity.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

  • QN-2561

    Asset class: Infrastructure.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

Begin Your Search Here
<