International Finance

STOXX and RiskFirst announce launch of LDI indices

STOXX, Risk First, indices, UK pension plan, indexation, retirement, UK pension schemes, fixed-income index calculation, inflation, LDI, cash flow
STOXX Ltd., the operator of Deutsche Börse Group’s index business and a global provider of innovative and tradable index concepts has announced the launch of the new iSTOXX-RiskFirst LDI index familyas of 23 April 2018

This new offering has been jointly developed with RiskFirst, the UK’s leading provider of risk analytics and reporting solutions to the defined benefit pensions market. STOXX will calculate a range of indices based on 12 profiles, capturing member type, duration, type of indexation (pre- and post-retirement), interest rate and inflation sensitivity and tax-free cash component of typical UK pension schemes. The indices combine STOXX’s real-time fixed-income index calculation capabilities with a unique set of data provided by RiskFirst.

Matthew Seymour, CEO of RiskFirst, said: “The set of indices we have developed in partnership with STOXX are a major leap forward, providing improved governance and increased accuracy in a cost-efficient solution. PFaroe is rapidly becoming an industry standard for the modelling of pension plans and therefore offers us unique insight into the behaviour of pension plan cashflow profiles at a very granular level. When combined with STOXX’s extensive experience in designing innovative and objective investment benchmarks, the result is a set of indices that deliver great value to UK pension plans.”

“With our new LDI index offering we are addressing the challenges of a £1 trillion market by providing independent benchmarks for liability-driven investments. Our LDI indices will support pension scheme trustees and consultants in their efforts to select, monitor and challenge LDI managers. This is further proof of our innovative approach to tackle market inefficiencies with transparent investment tools,” said Matteo Andreetto, CEO of STOXX.

The iSTOXX-RiskFirst LDI indices track the performance of corporate and government bonds denominated in GBP. They function as flexible, investable building blocks for LDI portfolios. Four different sets of indices are provided: nominal bond indices, inflation-linked bond indices, blended indices and non-gilt indices.

The indices are constructed using a proprietary cashflow matching model that incorporates best-in-class LDI techniques.Certain key features of LDI portfolio construction, such as rebalancing between real and nominal exposure, are embedded in the index family. The indices are rebalanced quarterly.

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