Index providers do far more than supply the benchmarks that index-based products aim to track. They also offer a range of services that wealth managers may look to in an effort to sharpen their strategies, streamline operations and deepen advisor engagement. Yet, some firms still treat index providers solely as data vendors—underutilizing a broader toolkit available to wealth and asset managers as they seek to gain a competitive edge.

According to new research from Cerulli Associates, most wealth manager home-office executives view index providers primarily as inputs for performance measurement and benchmarking.¹ But a select group—particularly those developing customized solutions, proprietary products or building model portfolios—are beginning to unlock the true potential of what index providers can offer. These firms are turning to index providers not just for data but for collaboration, and in doing so, they're discovering new ways to differentiate and scale.

Financial Advisors' Level of Engagement with Index Providers

A recent blog examined the forces contributing to the rise of indexing in wealth management. While the vast majority of financial advisors use index-based investment products, most aren't engaging with index providers in other ways (see Exhibit 1).

This invites the question: what other opportunities might be available for wealth managers that seek to leverage index providers' offerings? Index providers provide various solutions, such as data and thought leadership. Forming a strategic relationship with an index provider that taps into these capabilities can help build a foundation for developing products and solutions that advisors can incorporate into client portfolios in support of their practices.

From Index Construction to Product Development Support

The Cerulli Associates paper explores how index providers can support the product development lifecycle. That includes helping firms choose the right index exposure, offering transparency on index methodology, and advising on how index data is delivered and integrated into internal systems.

For advisory firms looking to stand out in a crowded and highly competitive field, brand alignment also matters. When launching new index-based products, licensing a brand from a known provider may lend recognition to such products, especially for firms that don't yet have household-name status with advisors or end investors.

Furthermore, index providers can help clients customize existing indices or commission a white-label index using their own intellectual property.

Resources for Education, Distribution and Advisor Engagement

Beyond the mechanics of benchmark construction, index providers are also sources of educational content and thought leadership—another potentially underleveraged tool, especially for wealth managers.

Firms can tap into these resources to inform advisors, support distribution, and supplement product narratives with index-related information. For example, index providers can contribute to educational campaigns that explain the methodology behind a new index objective, share market context, or offer historical performance data. Providers may also support advisor meetings or webinars, giving wealth managers a way to deliver expert insights on indices directly to the field.

As wealth management incorporates outsourced portfolio construction and more scalable solutions, firms that make the most of the full range of services that index providers offer may find themselves better equipped to meet advisor needs and investor expectations. Read the full report by Cerulli Associates to learn about other ways asset and wealth managers can optimize their engagement with index providers.

¹ The Cerulli Associates whitepaper "Redefining the Role of Index Providers" was sponsored by S&P Dow Jones Indices.

The S&P 500^® continues to be a trusted benchmark for the broad U.S. market, measuring the performance of U.S. large-cap companies across various sectors. As the market moves, certain stocks and sectors grow to represent a larger share of the index, highlighting their significant influence on the economy. While this is the natural result of market-cap weighting, some market participants are exploring alternative strategies in pursuit of enhanced diversification.

In this blog, we introduce the S&P 500 Diversified Sector Weight Index, which aims to mitigate concentration risk and address sector imbalances by reweighting companies within The 500™. This innovative approach employs a hierarchical equal sector weight methodology, utilizing Syntax's FIS^® sector taxonomy.

FIS's Sector Taxonomy

This six-level classification system captures the diverse business models and product lines of companies. As shown in Exhibit 1, the FIS sector taxonomy consists of 8 sectors, 24 sub-sectors, 72 industries, 193 sub-industries, 311 business activities and over 3000 individual product lines in the S&P 500 universe.

Index Methodology

The S&P 500 Diversified Sector Weight Index equally weights each of the eight primary sectors defined by Syntax FIS with quarterly rebalancing.¹ Within each sector, level 2 sub-sectors are equally weighted, as are level 3 industries, and so forth down to business activities level (see Exhibit 2). At the lowest level, within each business activity,² stocks are weighted proportionally based on the revenue generated within that specific activity.

Diversification Beyond Primary Business

Unlike traditional classification systems that categorize companies solely by their primary business segment, the FIS classification scheme enables a single company to be represented across multiple sectors and industries. As a result, if a company generates revenue from more than one business activity, its final weight in the index is the sum of the weights from each of its business activities.

As shown in Exhibit 3, over 41% of S&P 500 companies engage in business activities across more than one FIS sectors, collectively accounting for 62% of the index's total weight.

A Short- and Long-Term View of Performance

Exhibit 4 illustrates that S&P 500 Diversified Sector Weight Index has historically outperformed the S&P 500 Equal Weight Index in terms of both absolute returns and risk-adjusted returns, across both short- and long-term periods.

Characteristics of the S&P 500 Diversified Sector Weight Index

Sector Level Diversification

Exhibit 5 illustrates that the S&P 500 Diversified Sector Weight Index boasts the smallest sector weight spreads and a higher effective number of sectors³ compared to its counterparts.

Stock Level Diversification

Although primarily designed to equalize sector weights and balance business risks, the S&P 500 Diversified Sector Weight Index has also historically reduced single-stock concentration. Compared to The 500, it maintained a higher effective number of stocks and featured lower maximum stock weights (see Exhibit 6).

Conclusion

The S&P 500 Diversified Sector Weight Index has had a more balanced representation of sectors and business risks within the S&P 500 universe. Furthermore, it has historically had lower single-stock concentration. Moreover, the S&P 500 Diversified Sector Weight Index has historically outperformed the S&P 500 Equal Weight Index.

¹ Please refer to S&P 500 Diversified Sector Index methodology for more detailed info.

² Within each Business Activity, each company is assigned a weight based on the product of (1) the weight of that Business Activity and (2) the trailing last 12 months' revenue that the company derives from that Business Activity, divided by the sum of revenue that all companies derive from that Business Activity. If a company derives revenue from multiple Business Activities, a company's final weight is the sum of the weights from each of the company's Business Activities.

³ Effective number of sectors is defined as the inverse of the sum of squared sector weights for each index.

The mid-cap segment of the U.S. equity universe, as represented by the S&P MidCap 400^®, has historically offered distinct views in terms of concentration, sector weights and return drivers. This prompts an exploration of whether these trends are reflected in the S&P MidCap 400 Scored & Screened Index,¹ which is a broad-based, market-cap-weighted index designed to measure the performance of securities meeting sustainability criteria, while maintaining similar overall industry group weights as the S&P MidCap 400.²

Starting with concentration, Exhibit 1 illustrates the weight of the 10 largest stocks in the S&P MidCap 400 Scored & Screened Index since its launch on Jan. 11, 2021, to April 30, 2025. The average weight stood at 9.20%, slightly higher than the S&P MidCap 400's 6.35%. However, this concentration was significantly lower than the S&P 500 Scored & Screened Index, where the 10 largest stocks accounted for an average weight of 37.82% versus 30.05% for the S&P 500^®. This indicates that while the S&P MidCap 400 Scored & Screened Index showed some concentration, it still retained greater diversification compared to its large-cap counterpart.

Next, we direct our attention to sectoral weights and their relation to excess return in the S&P MidCap 400 Scored & Screened Index versus the S&P MidCap 400. Exhibit 2 summarizes the results of the Brinson³ attribution analysis for the year ending April 30, 2025. The S&P MidCap 400 Scored & Screened Index outperformed the S&P MidCap 400 by 0.32%, primarily due to stock selection effects (0.29%) as opposed to sector weighting effects (0.03%). This aligns with the index's construction methodology, which aims to maintain overall similar industry weights to the S&P MidCap 400.

Further analysis of excess returns reveals key distinctions between the S&P MidCap 400 Scored & Screened Index and its large-cap counterpart, the S&P 500 Scored & Screened Index. Exhibit 3 summarizes the results of a similar Brinson² attribution analysis and shows that the S&P 500 Scored & Screened Index underperformed the S&P 500 by 2.82% over the one-year period shown, primarily due to negative stock selection effects (-2.64%). Sector contributions varied significantly: the performance of the S&P MidCap 400 Scored & Screened Index was boosted by the Health Care (0.86%) sector, while Industrials (-0.64%) contributed negatively to performance (see Exhibit 2). Conversely, the S&P 500 Scored & Screened Index faced significant negative selection effects in Information Technology (-1.11%) and Communication Services (-1.09%), with only a minor negative stock selection effect from Health Care (-0.03%; see Exhibit 3).

In summary, past results underscore the distinct differences in concentration, sector exposures and return drivers between the S&P MidCap 400 Scored & Screened Index and the S&P 500 Scored & Screened Index, reflecting the historical trends in their respective broad market benchmarks. Given these insights, the S&P MidCap 400 Scored & Screened Index shows its potential as a diversified benchmark for the mid-cap U.S. equity universe while pursuing sustainability criteria.

¹ Formerly known as the S&P MidCap 400 ESG Index.

² See the S&P Scored & Screened Index Series Methodology.

³ For more information on this widely used performance attribution model, see Brinson, Gary P., Hood, L. Randolph, Beebower, Gilbert L., "Determinants of Portfolio Performance," Financial Analysts Journal, July-August, 1986.

S&P DJI's SPIVA (S&P Indices versus Active) Scorecards have been measuring active funds' performance against appropriate benchmarks for over 20 years. With the release of the SPIVA Asia Ex-Japan Year-End 2024 Scorecard, our latest regional addition, all 11 regional SPIVA Scorecards tracking fund performance in 2024 are now available.

2024 was another challenging year for active managers, with a cross-category, fund-weighted average of 71% of equity funds listed across all regions in Exhibit 1 underperforming their respective benchmarks. Exhibit 1 shows the underperformance rates by region for selected equity fund categories across 1-, 3- and 5-year horizons. Note that majority outperformance in 2024 was only achieved by active managers in Mexico, South Africa and the MENA region.

U.S. dominance prevailed versus the rest of the world, with the S&P 500^® up 25.0% in 2024, outperforming the S&P World Ex-U.S. Index by 19.2%. Large-cap dominance meant a higher hurdle for active managers to climb, with only 28% of constituents outperforming the S&P 500. Given the increasing concentration and outperformance of the largest stocks in 2024, it is unsurprising that 65% of large cap managers, who may often be underweight the largest stocks,¹ underperformed The 500™.

The challenge of stock selection was not a phenomenon unique to the U.S. in 2024—it was also observed globally, as 59% of stocks on average failed to beat their respective benchmarks globally (see Exhibit 2). Chile, Mexico and South Africa were bright spots, with only 39%, 47% and 52% of stocks underperforming their respective benchmarks, coinciding with majority outperformance rates in two of the three regions: Mexico and South Africa.

While generating outperformance was tough for stock pickers, fixed income managers performed relatively better than their equity peers, with only 48%² of funds listed across all regions in Exhibit 3 underperforming their respective benchmarks. In the U.K., German and U.S. bond markets, the beginning of 2024 saw heightened interest rates and an inverted yield curve that disinverted throughout the year. Bond managers who shortened their duration exposures may have been the benefactors of such an environment. Exhibit 3 shows underperformance rates by region for selected fixed income fund categories across 1-, 3- and 5-year horizons.

Tilting toward riskier credit segments was a potential tailwind for bond managers in regions like the U.S., with a 7% excess return between the iBoxx $ Liquid High Yield Index and iBoxx $ Liquid Investment Grade Index. Only 30% of Investment-Grade funds underperformed the iBoxx $ Liquid Investment Grade Index compared to 66% of High Yield funds versus the iBoxx $ Liquid High Yield Index. European credit managers also fared well, with majority outperformance rates for euro-denominated corporate and high yield funds.

Despite strong relative performance in 2024 from most fixed income fund categories, the long-term trends of underperformance remained. Exhibit 4 shows that, on average, 80%³ of funds in categories included in Exhibit 3 underperformed their respective benchmarks over the 10-year horizon. Only one fixed income category, the South Africa Short-Term Bond benchmarked against the STeFi Composite, recorded majority outperformance over the past 10 years.

While active manager performance varies across regions and across asset classes, one trend remained true: outperforming the benchmark is difficult, especially over the long term. Find out more from our SPIVA Library.

¹ Chan, Fei Mei and Lazzara, Craig, "Degrees of Difficulty", S&P Dow Jones Indices, January 2022

^{2, 3} Cross-category, fund-weighted average

Launched on May 18, 1995, the S&P Composite 1500^® (the S&P 1500™) celebrated its 30^th anniversary yesterday. Designed for investors looking to replicate the performance of the U.S. equity market or to benchmark against a representative universe of tradeable stocks, the S&P 1500 combines the S&P 500^®, S&P MidCap 400^® and S&P SmallCap 600^® indices in proportion to their free-float market capitalizations. Exhibit 1 shows that the S&P 1500 covered more than 95% of the U.S. equity market's USD 53.7 trillion float market capitalization—as measured by the S&P Total Market Index—at the end of April 2025.

Despite majority representation from large-cap companies—S&P 500 companies accounted for USD 47.2 trillion of the S&P 1500's USD 51.1 trillion index market capitalization at the end of April, and an average of 89% of the S&P 1500's weight at the end of each year between 1995 and 2024—market participants may have found it beneficial to incorporate smaller U.S. equity size segments.

Indeed, mid- and small-cap U.S. equities have distinct characteristics and market participants risk overlooking a sizeable portion of the global equity opportunity set by ignoring them: smaller U.S. size segments are as large as some countries' entire equity markets. Exhibit 2 shows that the S&P 1500 benefited from its exposure to smaller size segments, slightly outperforming the S&P 500 over the past 30 years.

An important observation about the S&P 1500 is that is it not simply the largest 1500 U.S.-domiciled companies since index additions must meet various criteria. Exhibit 3 summarizes many of the criteria that are outlined in the S&P U.S. Indices Methodology. For example—and unlike many other U.S. equity indices—the S&P 1500 and its component indices utilize an earnings screen whereby new additions must have a history of positive earnings before they can be considered eligible for addition to the S&P 500, S&P 400^® or S&P 600^®.

One way to see the impact of the S&P 1500's index construction is to compare the characteristics of S&P 1500 stocks with "Extra 1500" stocks. The latter group consists of the largest 1,500 U.S. stocks that were not members of the S&P 1500 at the end of April 2025. Exhibit 4 points to the S&P 1500 being an efficient measure of the U.S. equity market: the S&P 1500 avoided many of the less liquid, lower priced and lower quality stocks in the "Extra 1500."

The S&P 1500 Index's 30^th anniversary offers a chance to reflect on its performance, characteristics and potential applications. Here's to the next 30 years!