S&P Dow Jones Indices (S&P DJI) has unveiled an aggressive plan to "exponentially grow" its fixed income indices in a response to "flourishing" global demand for fixed income in passive investment strategies and as benchmarks for actively-managed portfolios.

The new S&P DJI fixed-income indices will cover over 20,000 individual securities with the ultimate goal of launching thousands of maturity- and sector-based benchmarks. S&P DJI already publishes over 500 fixed-income indices, covering municipals, preferreds, corporates, CDS, and senior loans, and reckons it is is the third largest provider of these indices for the global ETF market.

"To provide an alternative weight, you need three elements: global sovereigns, inflation protection and then credit (corporate bonds)," said JR Rieger (pictured), global head of fixed income at S&P DJI. "Our expansion is about providing the entire global perspective for those three core areas, so that we can apply different factors (alternative weighting) to meet different investment objectives."

The flagship S&P US Aggregate Bond Index is a market value-weighted index designed to measure the performance of the investment grade, US fixed-income market, which includes US Treasuries, quasi-governments, corporates, covered bonds, taxable municipal bonds and residential mortgage pass-throughs.

S&P DJI has also launched the a Global Developed Nations Sovereign Bond Index and Global Developed Nations Inflation-Linked Index, and is also building an expanded family of global bond indices based on global corporate bonds, global emerging markets bonds and inflation-linked indices measuring markets in Europe, Asia-Pacific, Africa, the Middle East and the Americas.

"For pension funds, it is all about meeting future liabilities, and these indices can be used in products to gauge their liability-driven investments (LDI)," said Rieger. "Fixed income is also becoming more tactical for many retail and short-term investors, and that is where exchange-traded funds (ETFs) could be used as a tool to make those tactical decisions, whether you see corporates as rich, financials as rich, or sovereigns as poor. The tactical capabilities that ETFs have brought to investors has made them an appealing vehicle for fixed income strategies."

Rieger also said that a range of factor-based fixed income indices (alternatively weighted indices), which seek to capture performance characteristics different from traditionally weighted benchmarks, will also be launched in 2015. S&P DJI's initial focus here will be on GDP- and environmental, social and governance-weighted benchmark add S&P DJI's line-up of equity and commodity factor-based indices, said Rieger

"We see an interest from the retail market for passive investments tracking these strategies," he said. "The ETF market is growing globally for the bond and over the counter (OTC) market, and those passive investments will be a key application for our fixed-income range. The structured products market is also using new benchmarks. We have seen an increased use of fixed income indices in structured products mainly linked to proprietary-based indices but this will eventually become an area where independent index providers can also provide value."

In preparation for expanding its range of fixed-income indices, S&P DJI has added five people to its global fixed-income team over the past year and a half, strengthening its presence, product development, and client support in the United States, Hong Kong, and Mexico.

The first indices launched by S&P Dow Jones Indices, as part of this expanded campaign, appeared during the fourth quarter of 2014 and were based around the Pan-Asia family of fixed-income indices, which includes 10 countries and over 120 indices (government, corporates, US dollar, and local currency) covered by the S&P Pan Asia Bond Index.

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