Alexander Forbes, the financial services group, is to launch a series of money market indices for use by investment managers including a short-term fixed-interest index (Stefi).
The Stefi is designed to replace the current Alexander Forbes Money Market Index (AFMMI), which the company says has come under review following major changes in the money market in the last 10 years.
Alexander Forbes says the AFMMI does not accurately reflect the new instruments available and is based only on three-month negotiable certificate of deposit (NCD) instruments. The Stefi is designed to be a more comparable and replicable index.
The Stefi range includes instruments that cover all maturities in the short-term market up to one year. The new indices include an overnight call deposit index, three-, six- and twelve-month indices, as well as the composite index Stefi.
Alexander Forbes says the ranges of new indices will be calculated on a daily basis as opposed to the current monthly calculation. Daily calculations and maintenance will be done by the SA Futures Exchange (Safex), and will be based at 100 on 1 October 2000. Backdated data will be available from January 2000.
Calculation of the indices is based on daily "issuance" of market instruments. "This implies that a category valued on a certain day will have the average rate of all instruments in issuance in that particular category based on the yield at issue," says Alexander Forbes.
The components of the composite Stefi index are weighted according to market capitalisation. Weightings are to be reviewed from time to time in case of significant changes in market conditions.
Alexander Forbes says the calculation of the current index by Alexander Forbes Asset Consulting will continue until December 2001.
The new index range and specifications will be available on the Safex website as well as on the systems of other leading market data providers.
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