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FTSE licence hike fury: what are the alternatives?
by James Phillipps on Apr 30, 2012 at 11:33
Wealth Manager revealed last week that several small and mid-sized private client firms had been asked to pay as much as £40,000 for licences, while online readers said they had been asked to pay as much as £50,000. Worse still, the indices include not just the FTSE 100, but also the industry standard FTSE Apcims range.
Matthew Hunt, principal at Prospect Wealth Management, said his firm uses the FTSE 100 as a benchmark and it is both important, and clearly understood by clients. But if charges were to rise he would seriously consider alternatives.
‘We pay for live feeds from Reuters and Bloomberg, so presumably some of that money goes through to FTSE,’ he said. ‘We are not going to pay for it twice and my feeling is that they will damage their business because people will walk away from them.’
He said the FTSE indices are already losing some of their value after access to their composition and history through the likes of Reuters and Bloomberg was reduced. Reuters responded by replicating the indices and providing full access to all relevant information on its mirror image versions, and Hunt would switch to these if faced with an ‘extortionate’ bill.
Others have already moved away from FTSE indices, such as the FTSE Apcims suite. Caroline Shaw, a fund manager at Courtiers Investment Services, said the group dropped them last January over concerns about their composition and relevance. Instead, the firm has adopted a straightforward MSCI World/Markit iBoxx sterling corporate bond index composite.
‘Nothing is perfect, but we were concerned about their composition, which always seemed behind the curve,’ she said. ‘They only added hedge funds and property in 2008 just before they blew up and only have gilts and not corporates in their bond allocation, which is not reflective of how portfolios are managed.’
Richard Harper, head of asset management at GHC Capital Markets, also prefers a composite approach, adding that existing indices are ‘not relevant if you are running holding equities, bonds, gilts and commodities’. Both he and Shaw believe clients are less concerned about fixed benchmarks and more about whether they are on track to meet their long-term objectives.
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