Qontigo’s chief executive officer Sebastian Ceria sat down with John Lothian News at FIA Boca 2022, where he discussed the inner workings of creating an index, Qontigo’s role in the ecosystem, and emerging trends within the industry.
Ceria, the founder and CEO of Axioma, also served as a professor at Columbia Business School from 1993 -1998. In his current role with Qontigo, Ceria leads the operations of the FinTech and analytics firm. He said that Qontigo’s role in the ecosystem has everything to do with the derivative products of indices that can be provided. “Those indices that we create, that we manage, we calculate and we design, go into building all kinds of derivative products as well as investable products like ETFs,” he said.
When creating an index, Ceria said the first thing to think about is exposure and transparency. He also emphasized that one should fully consider what’s going on in the minds of investors. “You want to make sure that the whole process of creating the index is known to the investor, and they also know how the index is going to evolve over time,” he added. Questions he often considers include, “Which of the companies are going to go in and out?” and “How are you going to calculate the market capitalization of any company that participates in the index?” He said questions like these are “becoming even more important as you start generating indices that have much more targeted exposures.”
In addition to discussing indices, Ceria said that one of the hottest things right now is ESG – Environmental, Social, and Governance – which pertains to how companies may influence investors on environmental, social, and moral levels. “As the world moves, or does the transition from brown to green, ESG indices are becoming one of the choices that pension funds and investment houses are putting their assets in,” Ceria said. Thematic Index Solutions, offered by Qontigo, is another element Ceria thinks is trending in the industry. A thematic index tracks the performance of companies while monitoring megatrends. It is a concept that Ceria says he helped to pioneer.
When asked about the future of the indexing world, Ceria said that the future is full customizability. “What that means is that the client is telling you, ‘What are the exposures? What is the data that they would like to incorporate in the creation of an index?’” From there, Ceria said an index can be created to cater to the specific needs of the client and what best serves the different needs of each individual investor.