Brian Upbin, director, index research, and David Tattan, vp, index and portfolio and risk solutions at Barclays Capital, answer SCI's questions

Q: How and when did Barclays Capital become involved in ABS indices?
BU: Barclays Capital publishes the leading family of broad-based fixed income and inflation-linked benchmarks for global investors. Fixed rate ABS have long been eligible for many of our flagship aggregate indices and as standalone ABS benchmarks for dedicated ABS investors.

In 2004 we broadened our ABS index platform to also offer investors floating-rate euro and sterling ABS benchmarks, in addition to the fixed rate ABS indices that were part of our Aggregate index family. Investors in this space were already users of our benchmark indices and were seeking a more complete total return measure for this asset class.

Earlier this year, we launched a blended multi-currency ABS index family that combine both our existing Euro and Sterling indices into a single pan-Euro ABS index family that includes both fixed rate and floating rate indices (see SCI issue 178).

So our ABS index offerings have been provided continuously for investors for quite some time. What was initially part of the Lehman Brothers benchmark index family was acquired and combined with the Barclays Capital index family in 2008 and rebranded as Barclays Capital Indices.
Brian Upbin                              

Q: Which market constituent is your main client base?
BU: Our client base is quite broad as the indices are useful both as performance targets for investors who explicitly want to measure their portfolio returns against an index and on an informational basis. There's a tremendous value in offering measures of broad market returns, sub-segments returns and security-level pricing, valuations and analytics for performance and risk management purposes.

The broad-based appeal of our indices is also reflected in the types of clients who use the indices. We deal with asset management firms and insurance companies, and we've also seen a lot of interest from the hedge fund community, as they're becoming more active participants in the ABS market. In particular, we're also getting a lot of interest in this index offering from the asset-owner side.

In terms of functions within firms, we're seeing demand across the board, including portfolio managers, research analysts, performance analysts and risk managers.

There are a lot of different functions even within a firm who are using the index on a day-to-day basis. We don't have a single target market - the indices are meant for broad-based usage for however they may be more useful within an organisation.

Q: How do you differentiate yourself from your competitors?
DT: The Barclays index platform already stands apart from the crowd. We differentiate ourselves from our competitors by the fact that we are a truly-global index provider with a proven track record of high quality analytics spanning 35 years. We produce approximately 30,000 indices every day and these form a comprehensive road-map to the global fixed income markets.

The pan-European ABS indices are small but very important parts of the Barclays Capital indices offering. We believe linking our proven index expertise with the fact that Barclays Capital is a global leader in securitised products is a very powerful combination.

BU: We see interest in these new ABS indices not just from dedicated ABS investors, but also from investors who deal with multiple fixed income classes. The fixed rate component is a subset of our broader-based aggregate indices, so we do see a lot of crossover index users who are already using Barclays Capital indices for their fixed income investments.

DT: Another differentiating factor is that we also offer custom versions of the pan-European ABS indices as many of our clients may only invest in particular parts of the European ABS market. This bespoke index service is an important factor.

Q: Which challenges/opportunities does the current environment bring to your business and how do you intend to manage them?
DT: For us, the ABS market challenges and opportunities are one and the same. Access to accurate analytics, pricing information on the less liquid parts of the market and a unifying portfolio management platform to accurately monitor Euro ABS credit and prepayment risk versus a widely-followed benchmark index are challenges that we face head on and also what sets our product offering apart.

BU: The challenge and the opportunities are both reflected in the demand we have seen for our indices thus far. Having built and maintained this index family for several years, we see how useful this data is for our clients on a day-to-day basis and how we are able to help bring clarity to the ABS market for investors to see both the performance characteristics and the risk characteristics of the asset class. The opportunity is clear.

The primary challenge is that this asset class is a more complex market than some of the traditional fixed income markets that we measure. It's a challenge we embrace and a primary reason that investors look to an index provider like Barclays Capital with significant indexing and market expertise.

Q: What major developments do you need/expect from the market in the future?
DT: When the European ABS market was first developing, there was much less focus on credit risk and prepayment risk - it was basically a buy-and-hold market. Things have changed and investors are out there trying to pick up distressed names and yield, just as they would do with corporate bonds.

They're asking for risk and portfolio management tools like Barclays Capital POINT to help them. We expect demand for portfolio management tools to help manage risk and to help outperform the European ABS benchmark indices.

BU: Overall, Barclays Capital has a heavy investment in its index and POINT platforms. We know that it's an important service for our index users and they depend on it for multiple stages of the portfolio management process. We are continually investing in our platform to offer not just ABS investors, but also other market participants, the products and solutions needed to measure, quantify and asses portfolio risk and returns.

JA