The FTSE Hedge index and sub-indices may be used as underlyings for structured products issued in Asia. Carl Beckley, director of research and development at FTSE in London, said there is a lot of interest in products linked to the index in Asia. Beckley noted FTSE already works with pension funds in Hong Kong so the brand name is well-recognized.
Beckley said most of the proposed structures he has seen use derivatives to offer the investor a leverage factor and averaging of returns. The FTSE Hedge indices have no tracking error, because they use the funds' net asset value rather than gross returns, explained Beckley. "This is an advantage for product structurers," he added. In the U.K., Barclays Capital and the boutique Pinder, Fry and Benjamin (DW, 11/1), have already used the index in structured products.