Thomson Reuters enters index market with 800 launches

Thomson Reuters has moved into the index provider market with the launch of 800 new equity indexes. The company intends to compete against established benchmark providers, targeting the likes of Standard & Poor’s, Dow Jones and FTSE Group.

The new indexes will be calculated using a proprietary classification model that encompasses 71,000 public companies and 230,000 private companies. “That is the way we classify companies in any industry – in our view it is more granular and broader than that of any of the incumbents out there right now,” says Sunand Menon, global managing director of indexes at Thomson Reuters, who will head the business from Boston in the US.

“The liquidity filter and the business classification are two areas where we feel we’re distinctive. These have been in academic circles for 15 to 20 years, but it’s the first time anyone has really applied them,” says Menon.

Asset managers and investment banks are the target clients for the indexes, which will be suitable for “the whole gamut of derivatives”, says Menon, including exchange-traded funds, structured products and certificates. “We are very happy to talk to people about anything that can be structured on the back of an index.” The rollout covers 44 countries, and Thomson Reuters plans to increase that to 58 by mid-2010.

“There are certain industries that you can’t find now in terms of classification. With environmental companies, if you want to track a sector that is exclusively renewable you’ll be able to do that, or if you want to track a sector that is exclusively wind or solar you’ll be able to do that. I think those are key differentiators,” says Menon.

Reuters, which merged with Thomson in 2008, has been calculating and distributing indexes on behalf of other businesses for 30 years. One index, which focuses on target risk, has already been licensed to a New York company building a mutual fund out of exchange-traded funds, says Menon, and there has been increasing interest and queries from Asian markets.