FTSE – Benchmark and Tradable Indexes for Every Market and User
By Mark Makepeace, Chief Executive, FTSE Group
FTSE Group is a global index provider, jointly owned by the Financial Times and the London Stock Exchange, which operates as a stand-alone company. It employs over 170 people in ten offices around the world. It is unique in the financial markets in that it is the only independent global index provider. It has no connections to brokerage firms or investment houses – the only business activity is the creation and management of indexes. This independence allows FTSE to provide truly objective market information free from any conflicts of interest. The relevance of the indexes is enhanced by the contribution made by FTSE's practitioner committees, who help refine the rules governing the indexes, and meet regularly to review methodology and the specific implementation of the rules, and is discussed below. Independent and Unbiased Index Committee Structure
FTSE Group is unique among index providers in its use of independent committees to oversee its indexes. These committees comprise of senior industry representatives who are in tune with market needs. Representation on the committees is balanced with active and passive fund managers, consultants and derivative issuers.
The Committees review and update the rules and regulations governing the indices in order to ensure that the transparency and accuracy of FTSE indices are maintained. There are eight main practitioner committees:
- FTSE Policy Committee
- FTSE Equity Indices Committee
- FTSE Global Classification Committee
- FTSE Actuaries Bond Indices Committee
- FTSE Americas Regional Committee
- FTSE Europe, Middle East Africa Committee
- FTSE Asia/Pacific Regional Committee
- FTSE4Good Committee
There are also several committees and working parties that oversee the reviews of partnership indices. They also assist FTSE Group with the development of products and services for current market needs. Some examples of these are:
- FTSE4Good Criteria Development Advisory Group
- FTSE Country Classification Working Party
- FTSE JSE Indexes Committee
- FTSE Xinhua Indexes Committee
- FTSE Nationality Working Party
FTSE's overall philosophy and approach is to create innovative indexes and data services on demand, backed by strong on-going customer support. Because of this distinctive approach, asset owners and financial professionals look to FTSE every day for the index tools they need to support their strategies in the management of international investment portfolios. To meet the demands of this sophisticated client base, FTSE now calculates over 60,000 indexes on a daily basis, covering equity, bond and alternative investment asset classes.
A cornerstone of FTSE's product portfolio is the FTSE Global Equity Index Series (GEIS). This is the starting point from which FTSE provides investors with an family of global benchmarks. The series is constructed using a ground-breaking methodology which allows us to cover 98% of the world's investible capitalisation through 7,000 stocks in a modular way. Through the FTSE GEIS index series, FTSE's clients enjoy unparalleled market coverage and flexibility, as we can design, calculate and maintain plan-specific benchmarks to suit any investment mandate. The world-renowned quality of FTSE indexes, coupled with the flexible customisation option offered by FTSE GEIS is attracting more and more of the world's plan sponsors to make the switch to a FTSE benchmark. These include the likes of CalPERS in the US , OMERS in Canada , the Mandatory Provident Fund in Hong Kong , the Norweign Petroleum Fund, AP3 and AP7 in Sweden , the Dublin Reserve Fund and the Fonds de Réserve pour des Retraites in its historic launch of French state pension funds.
We are proud of the strength of our brand and the visibility it has gained globally. Our indexes appear on a daily basis in online, broadcast and print media worldwide and FTSE has become a byword for accuracy and reliability on world market information. Because of this reputation, we are proud to be selected again and again as the preferred index partner by exchanges around the world to develop new indexes and services for investors in global markets. Partnering with exchanges and financial institutions
Rapidly gaining visibility is another of FTSE's partnerships with Euronext, the Pan- European stock exchange. Together we developed a highly sophisticated set of tradeable European indexes, the FTSEurofirst Series. Created in April 2003, and designed to be the most accurate and flexible representation of the pan-European investment landscape, FTSEurofirst has already established itself as a force to be reckoned with. Our confidence in this series is shared by the market and the series has met some important milestones; there are promising volumes on the future and option contracts launched on Euronext.liffe in June 2003, a warrants programme has been set up by BNP Paribas and Société Génerale, the Swiss Pensionskasse Post is using the FTSEurofirst 80 as a benchmark and La Poste, the national postal system in France, is using FTSEurofirst 80 as one of the underlying indexes for a guaranteed fund. Barclays Global Investors (BGI) recently announced that it will use the series as the basis of two Exchange Traded Funds (ETFs), to be operational this Fall. Index values and constituents can be found at http://www.ftseurofirst.com/, along with monthly updates about the series.
The partnership approach to overseas markets is a strong advantage for FTSE. We work with nine stock exchanges worldwide, and enjoy further partnerships with a range of financial institutions. A good example of this approach is our joint venture company, FTSE/Xinhua Index (FXI), which we have created in partnership with Xinhua Finance of China . Using Xinhua's unique knowledge of the Chinese market and mixing FTSE's sought- after index design skills, we have created a business which provides an innovative approach to indexing which meets the needs of domestic Chinese investors, as well as the ever expanding group of international investors seeking to access and understand this exciting market.
In the domestic market, FXI is playing an important role in the investment process. As discussed in the sidebar within Chapter 14 of the book, China 's first domestic index-tracking fund was launched by Boshi Fund Management, one of the largest fund managers in China , tracking the FXI A200 index. Also in 2003, Xiangcai Hefung Fund management Co Ltd launched the first approved domestic umbrella fund, Xiangcai Hefung Sector Series, also selecting FXI indexes. The full range of indexes, along with methodology information can be accessed at http://www.ftsexinhua.com/