The Pfandbrief 2011 | 2012

Pfandbriefe in Securities Indices – Current Trends and Applications
Relevance
Indices naturally do not have the same relevance for all investors when it comes to measuring
performance. In most cases, a yardstick by which performance is measured emerges from a
certain disbursement profile, such as with pension funds or life insurance companies. Here,
the yardstick arises from pension claims and the times at which they can be drawn or from
mortality tables, as well as the guaranteed minimum interest rate. Where bank investors are
involved, performance relative to an index is often an objective that is subordinate to liquidity.
Under this constellation, the resulting performance objective is at most derived from debtservice
costs. For these types of investors, orientation to an index would carry the risk that
while the index might be beaten, the performance objective would not be attained due to outside
payment obligations, which, in a worst-case scenario, could entail severe, existential consequences.
Accordingly, investors who are primarily oriented to external indices are thus not
directly dependent on certain payment models. Traditionally, these have been asset managers
and central banks. In the context of insurance, index-oriented performance measures are normally
to be found primarily with the awarding of special fund mandates.
BUYERS OF COVERED BONDS, BY INVESTOR CLASS
46
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2010 2011
Banks/
financial
institutions
Fund
managers
Central
banks/SSA
Others
Insurance
companies/
pension funds
Sources: Informa, ifr, UniCredit Research
“Bespoke Index” as the General Rule
Particularly for the last two groups, however, there is a question of whether external market
indices represent the correct benchmark for measuring performance. Since the investment
strategy is customarily embedded in a macro strategy, which likewise normally over- or underweights
certain countries in comparison to the overall market, “off-the-rack” indices tend to be
less than optimal for measuring performance. For example, in the case of an investor that, on