Products September 21, 2009

FTSE Launches Currency Forward Rate Bias Indexes

Index provider FTSE Group (FTSE) and Record Currency Management, a specialist currency investment manager, have launched the first set of indexes within the new FTSE Currency Forward Rate Bias (FRB) Index Series.

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The new FRB5 indexes utilize the five most widely traded currencies (U.S. dollar, euro, Japanese yen, pound sterling, and Swiss franc) in a forward rate bias (also referred to as ‘carry’) strategy, according to a press release. Forward rate bias is the observed tendency of higher interest rate currencies to outperform lower interest rate currencies, the announcement explained. This outperformance is captured through a series of rolling one-month forward contracts, equally weighted across all 10 currency pairs.

Research from Record shows that FRB provides a fundamental and sustainable return stream that rewards the risks associated with holding higher interest rate currencies. The annualized return of the FTSE Currency FRB5 total return index in USD is 9.7% p.a. since 1978.

The new indexes will be calculated on a fully investable basis and published daily by FTSE (both excess return and total return).  These indexes can be used for portfolio construction, index-tracking management, including within financial products such as ETFs, and benchmarking active currency strategies.

More information is available at www.ftse.com.

Data & Research September 21, 2009

DC Sponsors Confront Risk Issues

Forty-two percent of corporate finance executives said they are very likely to limit high-risk investments for their defined contribution plans, according to a poll by CFO Research Services in collaboration with Prudential Financial.

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Respondents also reported that their companies are very likely to add investment products that offer some protection against market declines (44%) as well as more conservative target-date funds to their DC plans (38%), in line with a renewed focus on protecting employees’ portfolios from disruptive market performance.

In their views about automatic enrollment, finance executives confirm a migration toward DC plans that better support employees’ retirement planning. Forty-two percent of respondents say their companies are very likely to increase automatic enrollment and contribution escalation efforts. Respondents are less likely to say they will increase funding for DC plan education in the next two years.

The survey covered 140 senior-level finance executives. The report is available here.

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