UBS Announces Launch of iBoxx US Pension Liability Indices
UBS today announced that it has partnered with International Index Company (IIC) to launch a suite of iBoxx US Pension Liability Indices, a three-index set of benchmarks that seek to mimic pension liability performance.
These indices are designed to help plan sponsors, consultants and investment managers construct more successful liability-based investment strategies.
"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. "Teams within UBS Global Asset Management and UBS Investment Bank worked together with IIC to develop this new suite of indices, which offer the industry what we believe are the most accurate and useful pension liability benchmark available today.
"When developing a pension fund's investment policy, defined benefit plan sponsors are increasingly concerned with managing the volatility of their plan's funding ratio. To manage the ratio more effectively, they must develop solid investment strategies that consider plan's liabilities in addition to many other factors. We believe that these indices will provide investable and appropriate benchmarks for such strategies," added Mr. Meder.
The iBoxx US Pension Liability indices are:
iBoxx US Pension Index - Aggregate, which 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, which 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, which 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.
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 advisors, consultants and other investors, including UBS Global Asset Management, to manage long-duration bond portfolios and other liability-driven strategies against them. Compared to currently available options for liability benchmarks, these indices are more comprehensive and offer the following advantages:
They are based on actual liability profiles and mimic the investment grade yield curve. They are therefore 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 in order 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, a global human resources services firm that consults on and administers defined benefit plans for thousands of large U.S. companies.
"We leveraged our extensive defined benefit plan database to provide UBS with liability profiles that are representative of typical defined benefit plans in the U.S.," said Ari Jacobs, retirement practice leader at Hewitt Associates.
*** About UBS
UBS is one of the world's leading financial firms, serving a discerning global client base. As an organization, it combines financial strength with an international culture that embraces change. As an integrated firm, UBS creates added value for clients by drawing on the combined resources and expertise of all its businesses.
UBS is the one of the world's largest wealth managers, a top-tier investment banking and securities firm, and one of the largest global asset managers. In Switzerland, UBS is the market leader in retail and commercial banking.
UBS is present in all major financial centers worldwide. It has offices in 50 countries, with about 39% of its employees working in the Americas, 37% in Switzerland, 16% in the rest of Europe and 8% in Asia Pacific. UBS's financial businesses employ around 72,000 people around the world. Its shares are listed on the SWX Swiss Stock Exchange, the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE).
International Index Company was established in 2001 to provide transparent, rules-based, multiple contributor indices. The iBoxx Euro and Sterling indices were quickly adopted as market standard, and US Dollar indices were launched in 2005. These were followed by Asian, inflation-linked, and ABS indices. IIC also manages and administers the iTraxx credit derivative indices. IIC is owned by ABN Amro, Barclays Capital, BNP Paribas, Deutsche Bank, Deutsche Börse, Dresdner Kleinwort, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley and UBS.
Additional information about the indices
UBS is not affiliated with Hewitt Associates.
UBS is a shareholder of International Index Company (IIC). The iBoxx US Pension Liability Indices includes data provided by IIC. That data is derived from a source considered reliable, but IIC and its employees, suppliers, subcontractors and agents (together IIC Associates) do not guarantee the veracity, completeness or accuracy of the iBoxx US Pension Liability Indices or other information furnished in connection with the iBoxx US Pension Liability Indices. No representation, warranty or condition, express or implied, statutory or otherwise, as to condition, satisfactory quality, performance, or fitness for purpose are given or assumed by IIC or any of the IIC Associates in respect of the iBoxx US Pension Liability Indices or any data included in it or the use by any person or entity of the iBoxx US Pension Liability Indices or that data and all those representations, warranties and conditions are excluded save to the extent that such exclusion is prohibited by law. IIC and the IIC Associates shall have no liability or responsibility to any person or entity for any loss, damages, costs, charges, expenses or other liabilities whether caused by the negligence of IIC or any of the IIC Associates or otherwise, arising in connection with the use of the iBoxx US Pension Liability Indices.
Chicago, October 18, 2006