New benchmarks on horizon as WMA inks deal with MSCI

The Wealth Management Association and MSCI are set to develop additional benchmarks for use by the WMA’s members – some 183 wealth management firms looking after more than £734bn for over four million retail investors predominantly in the UK.

The deal involves MSCI providing a series of multi-asset class indices. Initially, this will see the continuation of the series of indices that have been in place since launch in 1997:

  • The Growth portfolio
  • The Income portfolio
  • The Balanced portfolio
  • The Conservative index
  • The Global Growth index

However, both Deborah Yang, head of Index EMEA at MSCI, and Liz Field, CEO of WMA, said that there is already work under way to increase the series family, into areas such as alternatives. This would reflect the changing demands and needs of the WMA’s members.

“Originally, there were two main purposes to the series,” said Field.

“One is to act as a reference point for firms to see how well they are doing against peers. The second is for private investors to see how their portfolios perform against industry benchmarks.”

“These are retrospective indices, so 90-odd firms give information on asset allocation over the previous quarter. That is anonymised, analysed and put to a panel of industry experts – individuals from within the membership. The panel takes a view on what are the norms, what’s happening on a sector basis, what’s changing or not as the case may be. So, it will take a view on what asset allocation should be, and then look to MSCI, our technical industry partner, to access the underlying data to create the reference points.”

“The indices are often quoted by firms in marketing material, for example, ‘our portfolios match or beat WMA indices’ or they are referenced by individuals who say ‘this is what the WMA indices say, this is how it should be performing’. Although the indices are predominantly used in the UK, one cannot underestimate the global reach of MSCI and how other firms and individuals may use them.”

MSCI’s Yang noted: “To begin with they will be similar indexes to those previously offered. They will be multi-asset-class indices, covering global and domestic equites, as well as fixed income, alternatives and real estate.”

“Our global reach, combined with our innovative range of product lines, will allow us to evolve the indices to adapt to changing wealth industry requirements.”

The WMA’s Field adds that the organisation has been conscious of the need to do more work on the alternatives aspects of indices. There have been discussions in the past couple of months with MSCI and ideas coming forward. She says that the market should expect to see some indices changing in future. This environment of changing needs has also been a key driver in the search for a new partner – in this case MSCI.

Adds Yang: “One advantage MSCI has is the ability to incorporate the analytics expertise of our Barra organisation into our index design. This allows us to drill down into the risk and return drivers of different asset classes, including factors such as liquidity and currency risks. That’s a benefit we are hoping to offer in support of WMA member clients. So, yes, we can definitely create indices that are suitable for private client portfolio benchmarking purposes.”

The launch of the first MSCI powered indices for the existing five areas outlined above will come by 1 March 2017. Once that core offering is published, then the WMA and MSCI will move on to work identifying the additional needs of the WMA’s membership. This will also involve an element of curbing the enthusiasm of the membership, Field said, because of the need to manage expectations around indices developments – a large number of ideas have already been floated, but developments must be seen in light of the diverse nature of end clients that wealth managers represent.

Further information on the series of WMA indices can be found at

This story originally appeared on International Investment’s sister publication InvestmentEurope, earlier today.

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 16 years he has been based in London writing about funds and investments . From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope.

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