A news release said the indices are designed to help plan sponsors, consultants and investment managers construct more successful liability-based investment strategies.
The iBoxx US Pension Liability indices are:
- iBoxx US Pension Index – Aggregate: mimics the overall performance of a model defined benefit plan in the US, taking into consideration the passage of time and changes in the term structure of interest rates.
- iBoxx US Pension Index – Active Member: mimics the overall performance of an active (non-retired) member liability profile for a model US defined benefit plan with the same considerations as the Aggregate Index.
- iBoxx US Pension Index – Retired Member: mimics the overall performance of a retired member liability profile for a model US defined benefit plan with the same considerations as the Aggregate Index.
“With the recent passage of the US Pension Protection Act and a global move toward pension funding reform, the ability to quickly and accurately track a pension fund’s ability to meet future obligations is critical,” said Aaron Meder, head of Asset Liability Investment Solutions (ALIS) in the Americas at UBS Global Asset Management, in the news release.
The indices, which are managed and administered by IIC, were developed in consultation with UBS Global Asset Management and the CreditDelta group within UBS Investment Bank. They are designed to allow plan sponsors, investment advisers, consultants and other investors, including UBS Global Asset Management, to measure long-duration bond portfolios and other liability-driven strategies against them.
According to the news release, the indices offer the following advantages:
- They are based on actual liability profiles and mimic the investment grade yield curve. They are more appropriate than most existing indices for measuring the performance of defined benefit plans.
- They will be published daily, using the LIBOR interest rate swap curve as the discount curve – a highly liquid universe.
- They provide the flexibility to use combinations of the indices to accurately represent customized liability profiles based on a plan’s specific participant population.
The initial model plan liability data underlying the iBoxx US Pension Liability indices comes from Hewitt Associates.