Markit Takes iBoxx Bond Indices into Smart Beta
Economic framework allows for creation of systematic factor based indices
Markit (Nasdaq: MRKT), a leading global provider of financial information services, today announced the launch of an economic framework designed for the creation of systematic factor based fixed income indices.
Markit will use the new economic structure to build fixed income indices based on broad macroeconomic categories including productivity, inflation, indebtedness and relative competitiveness to provide insight into the health of countries or regions. The model assigns weights to determine the relative significance of each economy and ultimately determines the asset allocation of the index. Markit has initially launched indices using specific factors based on the following: GDP growth, PMI, inflation, unemployment rate, national debt to GDP ratio, history of default and global competitiveness.
Ibrahim Kara, director and head of index research at Markit, said: “Our framework enables us to build indices based on internal and external factor models, while ensuring the replicability of the index. This new offering complements our traditional market value weighted and liquidity focused indices.”
Markit is a leading independent provider of fixed income and macroeconomic indices, calculating more than 14,000 indices globally. Our indices include the iBoxx™ bond indices, the iTraxx™ and CDX™ credit derivative indices, as well as the Purchasing Managers’ Index™ (PMI™) series, which are used as indicators of economic activity in over 30 countries. More than $80 billion in ETF assets are linked to iBoxx indices of which more than $4 billion are linked to alternatively weighted iBoxx indices.