In the second part of an interview, Matteo Andreetto (pictured), chief executive at Stoxx, talks about the shift from single player mode into a multi-players mode, as well as the market trends in indexing for 2018 and how the firm's structured products customised range will continue to appeal investors as improved data will allow the structuring of new diversified investment products.

According to Andreetto, the fact that Stoxx's factor indexes have been licenced to Eurex as underlying for futures, not only validates the index provider's definition of factors and makes it available in the market as a tool that everybody can use, but also it can now be used as building blocks "to build some of the strategies we use as underlying for index-linked products".

"With futures, investors can go long/short and that is a differentiation per se, because investors can differentiate according to their personal views," says Andreetto.

Stoxx has also capitalised on new activity around sustainable investing which has become "more and more become part of investors' portfolio", according to Andreetto. "Now, investors both on the institutional and retail side recognize the fact that there is indirect benefit of having ESG overlays in terms of potentially using the volatility of the constituents and also of the basket in general," says Andreetto. "If you invest in companies that have a high score by governance attributes for example, these companies tend to have lower volatility of the stock price."

As any other index provider, Stoxx has also developed a range of solutions in the ESG space to "enable investors capitalise on this" trend which includes the ESG Leaders, a family developed with Sustainalytics, as well as a Low Carbon family of indices, according to Andreetto.

"We see ESG really as a crossroad between factor and thematic investing. It is almost going full circle because themes, traditional baskets in structured products, have been popular for the past 20 years," says Andreetto. "We are not reinventing the wheel, but what we are bringing to the table is clearly the definition of the investment universe which is clearly research driven."

According to Andreetto, fundamental ratios are included in the selection criteria by Stoxx's research team in conjunction with third party data providers to create "a better specified investment universe".

"What comes on top compared to the traditional basket approach is really the mechanics of the index," says Andreetto. "These are liquid diversified investment products rather than just a basket of securities."

According to Andreetto, over the past year, Stoxx had to switch from a single player mode into a multi-players mode "as you need to partner up with other people to actually provide the best possible exposure that can used as underlying".

Andreetto also believes that new investment products can only be successful if "we as index provider switch from single player to multi-players mode", and points at Netflix as "a very good example for this strategy".

Stoxx will continue developing its customised indices for structured products as a statement to its 'one size doesn't fit all' approach around product development "which is part of our DNA", according to Andreetto. "The differentiation in strategies comes from consuming multiple datasets and being able to have a technology platform that allows you to produce indices that are robust, reliable, transparent and have a very strong brand behind," says Andreetto, adding that at the end of the day, "the quality of the product clearly represents the first reason why people decide to go for Stoxx as an index provider".

Andreetto's forecast for 2018 is a positive one as the index provider will try to capitalise on its "very strong credibility" not only around product innovation, "but also as high quality operator with a technology platform that allows us to design and calculate and perform all those potentially very complicated strategies".

"The need for tailor-made products has increased," says Andreetto. "The innovation [and] the differentiation in products is something that is clearly driving a lot of attention from distributors in the derivatives market. Having differentiated products, being able to customise, being able to create or explore different themes will become even more important. And clearly also understanding the end customer! Designing for the sake of designing, for the sake of innovation, doesn't work. It is important that some of our strategies are intuitive, easy to understand."

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