As money managers bemoan the fees lost to passive investing, there's one sector of the financial world just fine with the shift: The companies that create the indexes tracked by trillions of dollars in assets.
S&P Global Inc., the creator of financial benchmarks including the S&P 500 Index, is up 60% this year, more than double the return of its flagship gauge of U.S. stocks. Meanwhile, rival MSCI Inc. has jumped 74%, its best yearly gain in a decade.
Such eye-popping performances show just how transformative the meteoric rise of indexed investing can be for the companies at its heart.
Although passive strategies have been luring cash from actively managed approaches for some time, this year assets in U.S. indexed equity mutual funds and ETFs topped those in active stock funds for the first time ever. The providers of the gauges underpinning those funds earn a slice of every dollar tracking their benchmarks.
"There's this big secular growth because of the movement to passive," said Hamzah Mazari, a managing director at Jefferies in New York. "Over time, that will continue to be a pretty strong tailwind for these companies."
Cost savings are a key driver of that shift, with passive equity funds charging an average 10 cents per $100 invested in the U.S., versus about 70 cents for active funds.
