Credit Benchmarks

Every Client is Unique

Every client is unique, but in common is their need to be treated uniquely. Some of our clients have asked us to work with them to develop bespoke credit benchmarks that help them to avoid inefficiencies in traditional ones.

Traditional Credit Benchmarks

Traditional credit benchmarks were built under the same methodologies as equity benchmarks, i.e. weighted by market capitalisation. This weighting is not necessarily a problem for equities, but for credit it sometimes forces fund managers to increase holdings in specific sectors (e.g. financials) that are issuing greater debt. This can be counterproductive.

Bespoke Benchmarks

Bespoke benchmarks allow clients to avoid this inefficiency: the credit universe is dissected in such a way that avoids such concentrations and seeks to ensure the tradability of the portfolio. Bespoke benchmarks can also be tailored to take account of scheme-specific considerations, such as sector risk and duration targets, and as a result can be far more efficient than standard benchmarks.

Real World Solutions

At Redington we have designed a bespoke credit benchmark for a leading financial institution pension scheme. We have also successfully selected and instructed managers on behalf of clients investing in credit, using bespoke benchmarks.