Stoxx Targets U.S. Expansion01.10.2014
Konrad Sippel, head of global business development at Stoxx, said the index provider’s US assets tripled in 2013 as it aims to build more products for the US market this year.
Sippel told Markets Media: “This year for the first time we will have a business development colleague based in New York so we have significant capacity to build new products and can respond much more quickly to local clients.”
Sippel is s responsible for developing new index concepts across all asset classes as well as for the existing indices of Stoxx, Deutsche Börse’s DAX indies and SIX Swiss Exchange’s SMI indices.
The German and Swiss exchanges acquired Stoxx in 2009 from Dow Jones with the aim of growing the business globally and using the indices to strengthen Eurex, their joint derivatives business.
Before the sale Dow Jones had been responsible for marketing Stoxx in the US but Stoxx is now targetting the region which is the largest and most developed exchange-traded fund market.
“In 2013 we grew US assets threefold from $1bn to $3bn,” Sippel added. “We do not intend to compete in the US against established indices but by actively solving problems by using a better methodology for our indices.”
Last October Stoxx produced a guide on the European equity investment landscape for US investors who have traditionally divided their equity allocations between US and non-US equities. The guide said: “We observe this attitude changing, however, as investors move toward an all-country view of the world. We believe this trend is positive since it allows investors to take a more focused view on countries and regions and make more incisive asset allocation decisions.”
The guide said the price of European stocks is now more attractive than in early 2003, when the region’s markets bottomed out following the burst of the dot-com bubble.
“Last year our flagship European indices saw assets grow from $17bn to $26bn and a big trend was inflows into pan-European indices while local indices such as the Dax remained stable,” Sippel said. “We have not seen the end of inflows into Europe as it remains a pretty attractive market.”
Sippel expects demand from asset managers for economic exposure indexes to grow over the next 12 months.
“For these indices, we analyse exposure in a benchmark to specific regions or countries using quantitative financial data rather than looking at a company’s legal domicile,” he said.
For example, last December the firm introduced the Stoxx Europe 600 EM Exposed Index representing those companies that derive substantial revenues from emerging markets countries. The index aims to provide emerging market exposure through highly liquid developed market companies.
Stoxx collects companies’ geographic revenue from their annual reports and assigns reported revenues to individual countries using the publicly available UN Comtrade database. If companies do not break down revenues geographically, Stoxx makes estimates using factors such as exports from the country where the company is based, GDP and imports.
Sippel also expects increased use of the GC Pooling Indices which were launched last year to provide transparent, rules-based alternatives to unsecured interbank benchmarks such as Libor and Euribor, which banks have been accused of rigging.
Stoxx partnered Eurex Repo to develop the pooling indices which are based on daily transactions on the regulated GC Pooling market, a secured funding market where participants trade electronically and anonymously through a central counterparty.
Sipple said: “We also expect a strong pick-up this year in the Strong Quality Index family, our environmental, social and governance (ESG) indices and our Risk Control indices.”
The Strong Quality indexes tracks companies that have been historically profitable, have strong working capital, lower financial leverage than the the wider market and meet specified trading thresholds which are then valued US triple-A corporate bonds. The Risk Control indices target a predefined volatility level between 5% and 20%.