MSCI get whacked as Vanguard changes benchmarks

I thought we were friends!

Shares of MSCI were pummeled on Tuesday after Vanguard Group said it was switching 22 of its largest index funds away from benchmarks provided by MSCI to cut costs. Vanguard was MSCI’s largest index licensing client and the change is expected to affect both ETFs and mutual funds.

Vanguard is shifting six international funds with $170 billion of assets to track indexes provided by the FTSE group while 16 U.S. stock and balanced funds with $367 billion in assets will switch to indexes developed by the University of Chicago’s Center of Research in Security Prices (CRSP). Additionally, four Canadian ETFs will see their benchmarks change with three going to FTSE indexes and one going to a CRSP index.

MSCI said the switch will be phased in over a number of months starting in January 2013 and will represent a loss in roughly $24 million in licensing fees. CEO Henry Fernandez said that ETF managers’ choice of index provider “may not be as sticky as we all thought. That said, BlackRock (BLK) said it would stick with MSCI indexes on its iShares family of funds, calling it “the gold standard of global and international equity indexes.”

MSCI (MSCI: NYSE: US$26.21), Net Change: -9.61, % Change: -26.83%, Volume: 15,260,557

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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