The new FTSE All-World Index could become a major competitor to Morgan Stanley Capital International's (MSCI) indices in the Asia Pacific. FTSE International director Graham Colbourne said FTSE and joint-venture partner ING Barings had begun marketing the index after going live last Friday. Mr Colbourne and ING international portfolio research analyst Elliott Flynn expect 'great enthusiasm' for the new index based on several differentiating factors from index groups. 'I think there is no doubt that in this region, MSCI is the market leader,' Mr Colbourne said. 'Having said that, what will tend to happen is that funds will change their benchmarks when they change their mandates, so what we're going to do is to be opportunistic by talking to them (fund managers) and telling them there is now a choice.' The All-World Index builds on FTSE's existing World Index with 49 countries and almost 2,600 stocks. The new index adds data on 19 emerging markets, including the mainland, Malaysia, South Korea, Taiwan and India. ING Barings provides the data, which is on top of existing coverage of the advanced emerging markets and developed market sectors. Ultimately, demand for the product will depend on the index's ability to provide a viable alternative to the market leader and other world indices. According to Mr Colbourne, the All-World Index is more transparent based on the application of its rules and its free-float adjustment. Like MSCI, the All-World Index has a set of rules, but FTSE's are chosen by an independent committee and not FTSE as a firm. If they need changing, that is up to the committee. FTSE says those who use the indices also advise on how to build them. 'The use of practitioner committees ensures that integrity is maintained at all times and that we remain close to - and can provide solutions for - the issues affecting international investors,' the index report said. The All-World Index will be free-float adjusted, meaning it only includes that portion of the shares that are available. This free-float process is being phased into the index. 'What this means is that the index is more liquid and more representative of the markets in which they're trading,' Mr Colbourne said. MSCI could also be introducing free-float adjustment for its index group. MSCI executive director John Fildes said yesterday a review on the issue was under way. 'We announced earlier this year that we were looking into the question of free floating but we'll not be rushing into it,' Mr Fildes said. 'One has to think about the impact on global asset application. We're studying it, and at some stage, we'll have further information.' While Mr Fildes defended MSCI's transparency and methodology, he added the group would 'relish' competition.
