Index provision for exchange-traded funds is a crowded field with major incumbents. It takes significant differentiating qualities to build a new presence in this area — qualities which won Solactive the Best Innovative Index in Asia Pacific at Asia Asset Management’s ETF Awards 2026.
Steffen Scheuble, chief executive officer of Solactive, says that in such a crowded and well-covered field, “the differentiating factors are branding and pricing”, adding that large market players in such an environment try to standardise everything and define the standard for everything. Their business model consequently tends towards a one-size-fits-all approach.
“We run our business in a completely different way,” he explains. “We have got different calculation formulas. We are using different rebalancing dates. We have a lot of customised file formats for our clients. We use some 10 to 15 data providers for ESG. The big shots try to standardise. We try to customise.”
Differentiation and pricing
Solactive’s differentiated approach succeeds not only on customisation, Scheuble says, but also on pricing. This sets the firm apart from the majors.
Relying on their standardised approach and incumbent pricing power, the large brands operate with very high revenue margins — 75% or more, in some cases. Add in the expenses of large offices in major financial centres and large headcounts, the biggest incumbents are operating with high cost bases.
“We believe that it’s not sustainable to run businesses at such high margins,” Scheuble emphasises. Instead, Solactive can come in under the very high revenue margins of the large incumbents, and still operate a successful and well-funded business, with a highly competitive cost advantage.
Additionally, large index providers tend to load on charges for ETFs linked to their indices, adding on a certain number of basis points for every dollar invested. Solactive enhances its cost advantage by avoiding this approach, offering the lowest cost exposure to the US, for instance, to a Solactive index at zero basis points.
“We have started to offer flat fee models, which enables the ETF issuer to offer their products at lower cost because they don’t have to pass on a certain portion of their revenue,” says Scheuble. “We just take out the ultra-high margins of the index providers.”
Multiple poles and growth prospects
According to Scheuble, the indexing business coalesces around three poles. One is the large global brands — incumbents with predominant market presence and pricing power.
The second is the ecosystem providers, who offer futures, options, and a host of other products and choices, all focusing on one core index. These ecosystems are here to stay, Scheuble says.
The third pole is the tech disruptors, who enter the market aggressively with state-of-the-art infrastructure and compete on pricing.
“Everyone who is in the middle needs to find a way between these three extreme poles,” Scheuble says. “From a market positioning perspective, it’s terrible to be in the middle.”
Consequently, market players will be driven towards one of the three poles — a dynamic which suits Solactive perfectly. “Whoever is in the middle will end up at one of the extreme poles,” Scheuble adds. “We try to win as much business from everyone who is in the middle.”
Customisation and customer focus
Solactive’s approach does not hinge on price competitiveness alone. Its customisation features and flexible offerings typify a highly customer-oriented approach — which is supported by the company’s private status.
“The incumbents are listed companies. A very important benefit is that Solactive is still private. It’s very helpful to have this long-term thinking,” says Scheuble. “We don’t mind about the next quarter. We are doing business to be the best positioned company in the very long term. That has a lot of influence on how we deal with clients.”
With a partnership-oriented pricing model that treats its clients the Solactive way, he adds, the company devotes much time to figuring out what is the right price point for end clients, and customising its offerings accordingly. “In the foreseeable future, the APAC region is one of the areas where we are investing and hiring a lot and seeing a lot of business coming up,” Scheuble says. Solactive is ready to address opportunities wherever they arise.
