SRP Americas Awards 2024: SPX plays with new capabilities

One highlight of the indices brought by the US index provider in the structured product space this year is the S&P 500 Market Agility 10 TCA 0.5% Decrement Index (SPMKTD), a collaboration between S&P DJI and RBC Capital Markets that began in the second quarter of 2023.

The S&P 500 becomes a building block that’s still very much a part of the story, but you're able to put additional capabilities around it - Kelsey Stokes

“The S&P 500 becomes a building block that’s still very much a part of the story, but you're able to put additional capabilities around it,” Kelsey Stokes (pictured), sales head of insurance at S&P DJI, told SRP.

Following its launch on 23 February 2024, the decrement index was shortly traded via structured notes by the Canadian bank in the US with the pipeline continuing to grow across financial intermediary channels.

In August, the index was introduced in the annuities market via the Max Growth 10 FIA with Nebraska-based American Life & Security Co acting as the issuer. 

“The S&P 500 Market Agility 10 TCA Index came about as we continue to build out our multi-asset franchise by leveraging S&P 500,” said Phil Brzenk (right), managing director, global head of multi-asset indices at S&P DJI.

With a 10% volatility target, the S&P 500 Market Agility 10 TCA Index measures the performance of equity (70%) and fixed income (30%) indices that each take long, or short positions based on momentum and volatility indicators on a daily basis.

“A short position is a potential of having positive performance in down markets. It’s quite different from most indices we’ve seen in the marketplace, including ours for structured products and annuities,” said Brzenk.

In addition, the multi-asset index features a transaction cost adjustment (TCA), which translates to 0.01% and 0.015% deduction for the equity and fixed income component indices, respectively.

“TCA is relatively new from the S&P DJI side. The intention there is to bring more transparency in terms of actual replication, especially for these indices that’re systematically changing the allocation on a relatively frequent basis,” said Brzenk.

The S&P 500 FC TCA 0.5% Decrement Index is the first index with a TCA mechanism introduced by S&P DJI back in June 2023. The equity index seeks to provide optimized exposure to the S&P 500 through Fast Convergence technology, which was developed by and licensed from BofA Securities.

“At this point, [TCA] is pretty well adopted in the US marketplace across wrappers from the conversations we’ve had,” said Brzenk.

The index has been traded via a fixed index annuity (FIA) by Athene in the US as well as an indexed universal life (IUL) by Prudential in Singapore.

S&P DJI indices launched and traded in annuity since 2023

Product launch	Carrier	Index	Wrapper
30-Sep-24	Security Benefit Life	S&P 500 Dynamic Intraday TCA	FIA
17-Sep-24	EquiTrust Life Insurance	S&P 500 Dynamic Intraday TCA	IUL
19-Aug-24	Delaware Life	S&P 500 Dynamic Intraday TCA	FIA
19-Aug-24	American Life & Security	S&P 500 Market Agility 10	FIA
29-Jul-24	American National Insurance	S&P 500 Dynamic Intraday TCA	FIA
05-Jun-24	EquiTrust Life Insurance	S&P 500 Dynamic Intraday TCA	FIA
08-Apr-24	Prudential Singapore	S&P 500 FC TCA 0.50% Decrement	IUL
27-Mar-24	SILAC Insurance	S&P 500 RavenPack AI*	FIA
22-Feb-24	Sammons Financial	S&P 500 Dynamic Intraday TCA	FIA
20-Dec-23	Investors Heritage	S&P 500 Dynamic Intraday TCA	FIA
18-Sep-23	Americo Financial Life and Annuity Insurance	S&P 500 IQ 0.50% Decrement	FIA
11-Sep-23	Farmers Life	S&P U.S. Dividend Growers VA RC2 7.5%	FIA
24-Jul-23	Athene	S&P 500 FC TCA 0.50% Decrement	FIA
17-May-23	SILAC Insurance	S&P 500 Duo Swift	FIA

_{*The S&P 500 RavenPack AI index was previously the Credit Suisse (CS) RavenPack Artificial Intelligence Index. S&P DJI took over the ownership and calculation of the index as of 27 March 2024. The CS version of the index launched in SILAC product prior to that date.                                      
Source: S&P Dow Jones Indices}                                           

The 0.5% predefined dividend markdown for the two indices “strikes the balance between something that will help to improve pricing but is not going to unnecessarily drag down the index performance over the course of a year,” said Stokes.

Over the last three years, S&P DJI has made specific investments to build out dedicated teams covering multi-asset, factors and thematic indices that did not exist as distinct teams previously.

The S&P 500 RavenPack AI Index and S&P Global Clean Energy Index have become flagships in the structured products market for S&P DJI on the thematic index side, according to Stokes.

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