The purpose of the study conducted by CEPS is to assess the feasibility of creating a CMU equity market index family that could contribute to the development of EU capital markets, including the development and integration of local capital markets within the EU. There are two specific objectives for the study:
- To develop a setup for a CMU Index Family with the definition of the investible universe, the set of inclusion criteria and weighting.
- To assess the market potential of the CMU Index Family and estimate the magnitude of the retail and institutional investor base expected to use it.
The proposed CMU Index Family consists of 38 indices in total. The CMU All Share Index is the main index, covering around 3,600 companies (EUR 5.3 trillion market capitalisation) headquartered in the EU-27 and listed on one of the EU-27 regulated markets and SME growth markets. The other thematic, size, sectoral and convergence indices consist of a subset of companies included in the CMU All Share Index.
The CMU All Share Index would have a low liquidity threshold and thus is unlikely to be used for investment. It is expected to be used for benchmarking, analysis and as the basket for investable sub-indices. The CMU Index Family could mobilise EUR 725 billion (13% of total market capitalisation) for tracking or benchmarking. However, the realisation of this potential would largely depend on governance, quality of the index provider, pricing and communication strategy. The study concludes that it is unlikely that an established private index provider on its own initiative will offer the index family and recommends a public-private partnership as a solution.