Deutsche Boerse Group's index business, Stoxx, is pitching among product providers the fixed income equivalent of the Eurostoxx 50 including the bonds of the top-flight blue-chip companies in the Eurozone. The Eurostoxx 50 Corporate Bond Index is a new benchmark tracking the corporate debt of the Eurostoxx 50 Index companies, and has been designed to act as an underlying for exchange-traded funds (ETFs) and derivatives.
The new index is an example of how Stoxx is leveraging the Eurostoxx 50 Index, its flagship benchmark, from a corporate bond perspective, according to Christian Bahr (pictured), head of product development, Stoxx Limited. "We looked into combining equities and bonds in a first stage, and the new index provides access exposure to the corporate bonds issued by the 50 companies comprising the Eurostoxx 50 Index."
The Eurostoxx 50 Corporate Bond Index has been developed to be used as underlying of index-linked products, but as an index provider "we don't have any preference towards a particular type of wrapper", according to Bahr. "Depending on the type of investor, the index can be deployed as a derivative instrument (swap), a tracker or as a traditional structured note with a defined pay-off," said Bahr. "This is a very liquid index and it's also tradeable, and can handle large volumes. The goal is to license the index to product providers seeking to offer their clients strategies that meet their investment goals."
The universe for the Eurostoxx 50 Corporate Bond Index is defined as bonds issued by Eurostoxx 50 member companies, their respective corporate group and subsidiaries of both. All eligible corporate bonds must have a remaining time to maturity of at least 15 months measured from the respective re-balancing date to the maturity date and must have a minimum nominal amount outstanding of €750m. Only euro-denominated fixed and zero coupon bonds are included. A minimum consolidated bond rating of Investment Grade (BBB and higher) is required. The index is market cap-weighted; capping is applied on issuer level at 20% and industry level at 40%.
According to Bahr, the index will resonate with investors outside Europe. "As we have seen with the Eurostoxx 50 there is demand from international investors for quality underlyings, and the Eurostoxx 50 Corporate Bond Index offers access to the 50 most liquid stocks in Europe but from a corporate bond perspective which allows us to replicate the success of the equity index in the bonds market," said Bahr.
The Eurostoxx 50 index was the most popular sole underlying for structured products globally in 2015 with more than 2,800 products featuring the European equity index, and was used in combination with other indices in thousands of products across jurisdictions. In terms of sales, the European flagship benchmark had an estimated US$26bn of assets under management (AUM) almost doubling the sales of the second most utilised underlying which was a basket of indices (Eurostoxx50, Hang Seng China Enterprises, S&P500) with over 2,300 products and US$14.5bn in AUM. SRP data also shows that Stoxx's smart beta range, iStoxx, has over US$1bn in assets linked to structured products.
Stoxx collaborates with IDC (Interactive Data Corporation), a leading market data provider, to use their continuous fixed income evaluated pricing service which provides real-time bond pricing. The Eurostoxx 50 Corporate Bond Index is calculated real-time in euro price and total return versions. Historical data is available from Dec. 31, 2010. The Eurostoxx 50 Corporate Bond Index is reviewed quarterly in March, June, September and December.
Matteo Andreetto, who was appointed chief executive officer at Stoxx, as Deutsche Börse Group reorganised its index services in March, said in a statement that the new Eurostoxx 50 Index Corporate Bond Index will enable a "consistent analysis" of the bond and equity market in the Eurozone. "With this launch, Stoxx is for the first time offering a bond index, and the Eurostoxx 50 Index is going multi-asset," said Andreetto.
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