Democratizing Index Investing

By David R Mueller and Sunil N Kurkure

It was dubbed “the deal of the decade,” and the industry transformation which followed unquestionably qualified that moniker. In 2009, BlackRock acquired Barclays Global Investors for ~$15B, creating the largest global investment manager with nearly $3T in assets under management (AUM). The crown jewel of the transaction, iShares, was the rapidly growing US ETF franchise with ~$300B AUM representing ~10% of total.

Since, BlackRock’s AUM experienced a dramatic shift from active to passive investment strategies that is emblematic of the broader industry transition – of BlackRock’s ~$9T total AUM today, >60% is in ETFs and other index products. In March 2022, Morningstar noted that for the first time in history, assets in retail (individuals) index-based funds surpassed assets in actively managed funds at ~$8T each, and the total AUM in index funds (retail and institutional) now exceeds $16T. This growth spawned the creation of an incredibly lucrative $6B+ revenue market segment for index providers such as MSCI, S&P Dow Jones and FTSE Russell; companies responsible for maintaining the indices these ETFs and other financial products track.

We believe the next wave of innovation in rules-based investing is mass segmentation or customization of investment strategies to meet desired investment outcomes - such as target risk-return profiles, specific exposure strategies like ESG, or general hedging. To deliver tailored indices for new investment products, the underlying technology platform must be built for scale; meaning it can consume more data inputs, around more asset classes, and deliver those indices swiftly. From the moment we met the MerQube team, we were aligned with the company’s vision and would soon build our conviction around their innovative technology-first approach to empower the industry’s next chapter.

Beyond addressing the challenge to scale the number of purpose-built indices, MerQube’s offering tackles two inter-related issues impacting this space. MerQube has succeeded in delivering intra-day adjustments, such as intra-day rules-based portfolio rebalancing, enhancing the ability to react to market events. Without these intra-day adjustment capabilities, institutions may find themselves in an undesirable position with sudden market movements. As a result, MerQube’s more comprehensive solution enables institutions to improve their risk and cost profiles while offering new innovative financial products to their end customers.  

MerQube’s founding team of Vinit Srivastava, Keith Loggie, and Praveen Yalagandula, created the company to address these challenges based on first-hand knowledge from customers at S&P Dow Jones Indices. MerQube developed an advanced index computation engine leveraging a cloud-based API-centric architecture for tailored index strategies. Today, the world’s largest financial institutions rely on MerQube to deliver innovative index-based products to their end customers in a timely manner. Srivastava and team have also attracted top talent in technology and capital markets. These factors will help MerQube establish itself as an industry leader.

Intel Capital is proud to lead MerQube’s Series B, and join prominent capital markets firms Allianz, Citi, JPMorgan, Laurion Capital, Morgan Stanley, and UBS as co-investors. We are delighted to collaborate on this next phase of MerQube’s journey and to bring technology to market that meets the growing and diversifying needs in this massive customer segment.