Announcing his retirement earlier this week, the industry is braced to lose a stalwart of indexing who has been at the forefront of most major leaps forward since he helped create the Lehman Brothers Aggregate index in 1986.
From developing the Lehman index, later purchased by Barclays in 2008, to launching the first-ever fixed income ETF with Barclays Global Investments (BGI) in 2005, Berkley (pictured) has shaped the market throughout his career.
“It is like comparing the internet to an encyclopaedia,” he told ETF Stream when asked how the industry had changed over that period.
“We went from publishing indices once a month to daily, the business model has changed entirely for index providers.
“It used to be transactional, which is why it was the purview of investment banks, but the business model of today is democratised. We have opened up the availability of information to everybody.”
Having retired once already in 2012 following a seven-year stint at what became BlackRock after it purchased BGI in what has been described as the “deal of the decade”, now appears as good a time as any for Berkley to bow out.
It is a career that has come full circle. Stepping down after managing and building on the global, US and euro-aggregate indices, he first help create at Lehman after it was acquired by Bloomberg Index Services in 2014.
Berkley will pass the reigns to Dave Gedeon, deputy CEO and head of index product at Bloomberg, in March, who will be responsible for expanding Bloomberg Index Services beyond its fixed income offering into equities, commodities, ESG and multi-asset strategies.
‘Faster, better, cheaper’
Passive industry growth over the last two decades has meant increasing downward pressure on fees and demand from ETF issuers to launch more cutting-edge products, an area Berkley believes is one of the biggest challenges for the industry.
“We always try to be faster, better, cheaper,” he said. “The stress points come from our clients that want to move quickly, they want to make decisions and they want to get their products launched as fast as possible to gain first mover advantage.
“We are working on a foundation that creates scale and speed, but no matter how fast you go, people are always going to ask you to go faster.”
He added creating real-time indices for the fixed income markets is one such innovation as well as “true multi-asset class indices”.
“Instead of just creating a composite index, where you have a 60/40 rule, there are ways of potentially incorporating all factors to create a proper multi-asset class index,” he said.
Helping to drive this forward, Gedeon said investing in product innovation for ETFs is an area the business will continue to prioritise.
“There is a lot of opportunity with the ETF wrapper,” he told ETF Stream. “It is about taking something that is remarkably complex, distilling it down into an index that fits in the product which you can then bring to market.
“That has been the driver of the ETF since its inception. It is about giving access to a basket of bonds, emerging markets and factors.
‘ESG won’t sell in Florida’
Focusing on Bloomberg’s index business in Europe, Gedeon said ESG will be a core driver of its operations in the market.
“Sustainability is a huge driver of everything, equity, fixed income and even commodities, so there is a lot of investment that Bloomberg is doing within the index business to meet that specific regional demand,” he said.
“Quite frankly it will not sell in Florida and probably also will not sell in Thailand or Korea either.”
The index provider has been active in launching sustainable indices in Europe. Last October, Bloomberg expanded its global aggregate green bond index range after launching a suite of Paris-Aligned fixed income indices in April.
Gedeon stressed the business will take a local approach by continuing to respond to clients’ demands and desires in the region.
“There have been a lot of thematic launches in Europe but there continues to be tweaks and customisations. Our ability to respond to client demand and desires is crucial,” he said.
Berkley added the ability to customise indices for different ETF issuers has been one of the historical changes during his time at the helm, further helping to democratise the industry.
“Putting the power into the hands of the users is something we are doing and continuing to invest in,” he said. “We can allow folks to create a rules-based benchmark, backtest it, adjust it and then they have their custom index
“The industry has been democratised. We have opened up the availability of information to everybody.”