It brings a whole new level of transparency and timeliness to being able to provide pricing and information about the portfolios. We know that investors, especially from some of those sophisticated institutional investors, they want to look across their portfolios and have mark-to-market, look at concentrations. They want to look at limits. They want to manage their portfolios in a way that they need much more granular data in the area. So we think this is going to be one of our most interesting highest growth areas. And so you asked where it’s coming from. It’s new demand. It’s new opportunities, and it’s ways we can bring together multiple products in our portfolio to meet the needs and the solutions of both sides of the equation, the investors and the asset managers.
Thanks for the question, Owen.
Operator: Our next question comes from Russell Quelch with Redburn Atlantic. Your line is open.
Russell Quelch: I wanted to focus on the Indices business, please. We’ve seen some interesting new product launches from you in the last quarter. And I’m wondering if you can give us some more detail on the pipe of new products in this area, mainly kind of what areas should we expect you to the focused growth? Are we thinking climate indices, derivatives, fixed income or where you’ve had some good product launches in the last quarter, but what more is there to come? I was also hoping you could explain how mix impacts revenue growth in this business, particularly in respect to asset class, please?
Doug Peterson: Russell, let me start, and then I’ll hand it over to Ewout to talk a little bit about the expenses and what we’re seeing on the financial side. But right now, there’s also a lot of changes going on in the asset management industry. I just talked about what’s happening with the private market side. But at the same time, industries like traditional asset management, we see the shift from active to passive, and what that plays to is one of our strengths. And you asked about the type of products which are coming out. Our [one set] is related to sustainability. There’s a whole type of new interest going on. And maybe a few years ago, that was more of ESG. Now it’s tending more towards climate and energy transition.
We see it with, for instance, our own across divisional index, which is related to battery metals. We also see a lot of interest in the climate — Paris Accord climate transition indices. So there’s a whole set of indices that we’ve been launching, in particular for European investors and with European asset managers related to climate. We also see a set of indices which are across or multi-asset class industries, which allows us to take advantage of what we have from S&P Global from our Index business, traditional S&P 500 and other equity indices. You bring that along with the credit and fixed income indices that came with IHS Markit, that’s a whole new asset class for us is to be able to provide a multi-asset class with the credit aspect to it, credit volatility.
There’s another set of products which are related to exchange-traded derivatives. They’re not direct indices, but there’s a lot more interest in risk management and hedging and trading strategies. And with our core foundation and our relationships with CBOE and CME, we’re able to develop a whole new set of ETDs. And we’ve seen strong growth in that area as well. So across the board, it’s climate. It’s multi-asset class. It’s factors. It’s a whole set of different types of indices on the fixed income side. And then it’s also exchange-traded derivatives and new approaches to products, which we’ve already been developing there. But let me hand it over to Ewout to give a little bit more color on the numbers.
Ewout Steenbergen: Russell, specifically your question about mix and mix shift, we are very pleased to see that the AUM fees are up again this quarter and that the AUM levels and the AUM fees are again correlated in the same direction. But a couple of more detailed comments I want to make there is first, as we have said many times, please keep in mind that if you look at AUM fees, there are also other categories going into the mix. It’s not only ETFs. There’s also mutual funds. There are insurance funds. There are OTC volumes, and all of them grew a little bit less than the average AUM levels of ETFs. So that is one part why you will see always a little bit of a discrepancy between AUM levels for ETFs and the fees. Secondly, the trends that we talked to you about last quarter of the mix shift is continuing.
What we are seeing is that the market is a bit risk off that there is a move from more specialty ETFs to more flagship ETFs. Our flagship ETFs are taking in a lot of flows, very positive flows we had this quarter. But those funds are more lower level of basis point fees. We think this is a current market trend situation that will refer us again at some point in time when the market will be more risk on and there’s more interest in the specialty ETFs. But this is a mix shift trend that we’re still seeing continuing also in the third quarter.
Operator: Our next question comes from Shlomo Rosenbaum with Stifel Nicolas. Your line is open.
Adam Parrington: This is Adam Parrington for Shlomo. September issuance trends were strong. Do you see that as a start of an improving trend or more indicative of companies rushing to get financing ahead of further rate increases, given the sharp rate movements we saw in September?
Martina Cheung: Yes. Thanks for the question. Yes, look, September was higher than we expected for sure. And we do believe that some of that was essentially pulled forward from Q4. Having said that, I think there’s a number of additional factors here that are important to think about Q4 and onwards. And some of those are some that I had referenced earlier. Do we, for example — will we see some issuers actually pull forward from ’24 in Q4 of this year, something we’re tracking. And as I mentioned earlier, we’re also looking at the amend and extend activity in the bank loan space, which was very strong in Q3 as well as some of the refinancing in bank loans as well. So a lot of factors. The sort of net new factor there, of course, as well is the geopolitical overhang that we have to continue to watch.
So overall, we take a prudent look for Q4 and the usual factors that we watch going into next year, we have a handle on all of those as well. One other point that I would just add, and this is something that I think is important since it’s a good indicator longer term is the flow of funds into fixed income funds. Q3, for example, into high yield and leveraged loan funds was a net positive. So that’s a good thing, good indicator. Through the first half of the year, we saw the inflows back into fixed income funds overall against the huge net outflow from last year. So these are things that we have to continue to watch go into Q4 and into next year. Thanks for the question.
Operator: Our next question comes from Jeff Meuler with Baird. Your line is open.
Jeff Meuler: There was a comment about an improving relative position in CLOs. Martina, how much of that was just about retaining capacity through — in headcount through a challenging market versus what else are you doing? And are there any kind of like IHS synergy benefits? And then just quickly, Ewout, if you can address what drove the lower tax rate? And if there’s any sort of like structural carryforward benefit from whatever is driving it beyond ’23?
