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| David Mark |
International Index Co. is launching its iBoxx U.S. Dollar Bond Indices in response to investor demand for a neutral family of bond indices and is going head to head with existing providers of dollar-denominated indices such as Lehman Brothers and Citigroup. "Most banks use bond indices as a way of capturing transaction flows... and use the same data for their research and their indices," explained David Mark, ceo of IIC in Frankfurt, Germany, who noted the iBoxx indices are modeled along the lines of equity indices. As a result, investors are increasingly demanding indices are handled by a consortium of dealers. IIC started its indices with euro versions and subsequently added sterling and Asian-currency bond indices to its roster. "We want to complete the puzzle on the global map and the biggest missing piece was the U.S. dollar," Mark explained. He declined to speculate how much money is run off of iBoxx's European indices but said anecdotal evidence suggests two thirds to three quarters of new mandates are being benchmarked to one of IIC's indices.
Mark said the availability of indices on given securities is an important driver for investment decisions and generates business for banks. "This is a convenient way to be in the index business without having to build a whole department," Mark noted. Investment banks including Goldman Sachs, Barclays Capital, Deutsche Bank, J.P. Morgan, Morgan Stanley and UBS will be contributing prices to the new indices. Mark declined comment on the fact large index houses such as Lehman and Citigroup are absent from the roster of participating investment banks.
The indices are comprised of Treasury, agency and investment-grade corporate issues. IIC uses the most conservative credit rating from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
