The world’s first stockmarket index for professional services firms was launched this week at the City headquarters of magic circle firm Allen & Overy.

A key aim of the initiative is to educate analysts and institutional investors about the potential benefits of investing in law firms once firms are able to float and raise external capital from 2011. Institutions will be encouraged to allocate analysts to cover the sector on the back of the index and help close a perceived ‘communications gap’ between professional services firms and the City.

The MPF Professional Services Index was compiled by investment bank Noble on behalf of the Managing Partners Forum, whose chairman is Sir Nigel Knowles (pictured), joint chief executive of DLA Piper. ‘We want investors to appreciate the profitability, growth and resilience of professional firms,’ Knowles said. ‘We envisage a world where the professions are recognised as crown jewels on any stock exchange; institutions allocate analysts to cover the professions as a distinct sector; [and] funds are created to invest in the professions, using our index as the benchmark.’

Some 35 companies satisfied the criteria established to qualify for the index. They have to be UK-listed on either the main market or AIM; have a market capitalisation of between £20m and £1bn; and not operate in financial services. Members include media group Aegis – the largest by market cap – accountancy consolidators Tenon and Vantis, and patent attorneys Murgitroyd & Company.

Using March 2006 as a base, the index showed greater volatility than the FTSE 350 Support Services Index, the closest in terms of overlapping companies. The professional services index outperformed the latter up to autumn 2008 and underperformed it afterwards. It consistently outperformed the FTSE UK AIM 100.

Alan Hodgart, chair of the MPF Listed Firms Committee, said: ‘This sector has hitherto been invisible. We are now at the stage where institutions are saying "tell me more" about these firms, but there is almost a complete absence of research into the sector.’

On the prospect of law firms raising capital and coming to market when the Clementi reforms take full effect in two to three years’ time, John Cowie, of accountants and investment managers Smith & Williamson said: ‘That will be a very exciting time. The investment community should be licking its lips and seeing who is going to come to the market first.’