jkulubya's comment is largely correct. And you most likely do understand what an index fund is. It's just that most people don't realize there are two sides to the product - the theoretical and the real. The index is a theoretical product (intellectual property). The fund is the real-world implementation. A fund manager takes a look at one of our S&P products and says "I want to make a fund off this" and S&P contracts a license with them to allow it since S&P owns the IP on that index - it is S&P's design and methodology.
An easy way to think of this is the retail example where you pay an investment advisor. You pay them to manage your money but they place all the trades through some broker. S&P is the investment advisor and the fund manager is the broker.
Very interesting. I always assumed that the SP500 index composition was some sort of loss leader for SP where the brand awareness created by the SP500 name served as proof of legitimacy for some other service.
Never thought the index composition could be a cash cow in itself. Im intrigued at how the IP is protected, in legal terms (i.e. what exactly is copyrighted or patented or trademarked or trade secrets), if you are able to comment on that aspect?
An easy way to think of this is the retail example where you pay an investment advisor. You pay them to manage your money but they place all the trades through some broker. S&P is the investment advisor and the fund manager is the broker.