FEATURE | Q&A
S&P DJI: decrement is evolving, we see demand in the US S&P Dow Jones Indices (S&P DJI) was awarded the Best Index Provider accolade at this year’s SRP Europe Awards in London for its continued expansion in the European market and market support with new underlying strategies. “At a business level, we also did well,” she says. “Our most recent earnings show that we grew over 16% yoy - from US$989 million in revenue in 2020 to US$1.5 billion in 2021. “Issuance of structured products tied to our indices remained incredibly robust with strong demand for our indices seen across all the regions. The US remains our biggest market for structured products, but we also grew in Europe as our relationships with all the issuers in the continent remain as strong as ever.” Competition for new underlyings in the structured products market is increasing. Is this good for the market or a risk to flood it with too many strategies? Aye Soe: In our opinion, the index industry is a competitive market because there are low barriers to entry and room for innovation. Competition is good because we are all in the spirit of providing solutions to our clients. The key is to keep pace with the competition and the new solutions coming to the market.
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he index provider launched 34 decrement indices in the 12 months to 30 September 2021, which were featured in a substantial number of products with sales volumes in excess of US$950m. Goldman Sachs launched 55 products, BNP Paribas issued 50+ products, with additional product issuance from Credit Suisse and Barclays. The S&P Euro 50 Equal Weight 50 Point Decrement Index was the most utilised underlying appearing in 36 products worth an estimated US$235m in notional (as at end September 2021). There are currently 90 products linked to the series one and two of this index worth an estimated US$775m, according to SRP. Looking back at last year, Aye Soe (pictured), global head of core and multi-asset product management, S&P Dow Jones Indices, says 2021 was a great year in terms of performance of capital markets with the S&P 500, which remains the most utilised index in the global structured products market as a single underlying, returning 21.57%.
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Competition keeps big players like us on our toes - we also must innovate constantly and address areas where we may be slower because of our size. We have a pulse on the market, and strong relations with clients which enables us to deliver solutions that fit our client’s needs. What trends are driving activity and growth for S&P DJI? Aye Soe: ESG, digital assets and thematics are driving significant activity and development but our broad market indices continue to lead, especially in Europe. We're very pleased that our international equity indices are making inroads in different markets and with established players. Decrement is interesting because it addresses specific issues related to structured products. These indices are evolving and incorporating newer features such as rolling futures with financing embedded. We are starting to see some demand for decrement indices in the US, and we are working with a few banks on those. It will be interesting to see if the US market follows Europe in terms of usage of decrement indices.
