Indices such as the FTSE 100 play a huge role in investment. They are used for monitoring the performance of a market, for providing a benchmark for a tracker fund to replicate and as a reference when analysing a fund manager’s returns.
The rapid growth of tracker funds, combined with a greater focus on portfolio analytics, means that compiling indices is now big business. Providers charge licensing fees to fund firms to use their benchmarks, so owning famous indices that are in high demand for index funds can be very profitable.
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