GLOBAL – State Street has launched a tool to measure the appetite of institutions for sovereign bonds.
It says the new Sovereign Bond Flow Indicator (SBFI) will be a useful tool for pension schemes. The launch comes as pension funds are buying into bonds in a bid to help match their liabilities.
State Street Associates’ founding partner Ken Froot told IPE: “Asset owners can make more intelligent strategic decisions through understanding trends.”
This will also influence how pension funds are structured and could impact the asset managers that schemes hire.
According to Froot, the SBFI “is an opportunity to see, make sense of and have access to information available in the marketplace, and make timely, tactical decisions”.
The SBFI – described as “a bit of a missing piece” of State Street’s flow indicator jigsaw but also a stand-alone measure – has been well-received by pension schemes.
“There has been a lot of very positive feedback,” said Froot, adding that State Street has been consulting with pension funds about this indicator for some time.
The SBFI measures the purchases and sales of domestic sovereign bonds by institutional investors, and is one of five flow-based research tools produced by State Street Associates. The others include the Equity Flow Indicator (EFI), the Portfolio Flow Indicator (PFI) and the Investor Confidence Index (ICI).
The SBFI measures investor flows across 13 developed countries throughout North America, Europe and the Asia Pacific region, said a State Street release.
Information is updated daily, and there is likely to be a monthly analysis of trends.
“Until now, investors in sovereign bonds have had to rely on official surveys for information that offer data with a one- or two-month time lag,” said State Street Global Markets chief and executive vice president Stanley Shelton.
“Now for the first time ever, our clients can access investment flows of sovereign bonds in a timely and accurate way.”
State Street has $10.1tn in assets under custody.
In other news, State Street Corporation has expanded its relationship with the $900m pensions arm of the Scotland-based Stagecoach Group – an international transport group.
State Street has expanded on its initial $600m custody-only arrangement, and taken on custody fund accounting and commission recapture. Custody fund accounting was formerly done in-house, while commission recapture is new to the scheme.