Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
Together again: FTSE and ASFA’s bond index
(Pictured: Chris Tse)
The unlikely alliance of FTSE, the index provider owned by the London Stock Exchange, and ASFA, Australia’s super fund association, has teamed up again for a new series of indices in Australia, this time for bonds. The FTSE ASFA Australia Bond Index Series is being sold on its independence from any of the big banks and brokers.
The bond series includes three main indices: an Australian overall index including corporates and sub-sovereigns; an Australian Government index and an Australian covered bonds index. There is also an index which includes bonds which have less than a year to maturity, which is new to the market and will help some fund managers reduce tracking error. The overall bond index has 424 of about 1,200 securities available to investors. The corporate sub-index has 193 bonds from 106 issuers. The largest corporate issuers are Westpac, NAB and Goldman Sachs.
Chris Tse, the regional director of FTSE, said that there was a demand for an independent index to aid price discovery. FTSE did not have its own trading desk and was not a bank, he said. UBS, which has both, is a popular bond index provider in Australia.
TSE said the takeover of the Russell Group by the London Stock Exchange, would not change the independent nature of FTSE’s index business.
ASFA and FTSE teamed up before, launching Australia’s first after-tax index for Australian shares in 2009. TSE said this index had been well accepted by the market.
He said that the importance of independence was emphasised by the LIBOR-rigging scandal in Europe, uncovered in 2012, resulting in hefty fines for several large banks and brokers.
The start date for the indices is January 2004.
Meanwhile, FTSE is searching for a new country head to run the Australian business. Tse said there were several candidates on a short list but declined to say when an appointment was likely to be made.
