PIMCO has launched the Global Advantage Bond Index (GLADI) for the fixed income sector that is GDP weighted rather than market capitalisation weighted.
The benchmark was developed to avoid most of the pitfalls market capitalisation weighted indices inherently reflect, according to PIMCO head of consultant relations Carol Molloy.
"The benchmark is intended to offer investors an improved measure of fixed income market beta that provides a yardstick for performance measurement," Molloy said.
She said global growth is well on the path of reversal from the developed world to the fiscally stable emerging markets.
"There are a number of transformations taking place such as the change in growth drivers and wealth dynamics. These changes will affect the ability of traditional investment approaches and indices to generate sustainable returns while also managing risk," she said.
The GLADI benchmark will include global investment-grade securities from developed to emerging markets, avoiding a disproportionate weighting to developed markets.
It will include 27.9 per cent of investment-grade credit stocks from the emerging markets, compared with the Barclays Global Aggregate Bond Index's 3 per cent.
The benchmark will also include inflation-linked bonds in addition to nominal bonds, providing a hedge against potential inflationary pressures.
Interest rate swaps will also be used in the benchmark. The benchmark is currently being marketed to the asset consulting sector and PIMCO's clients.
"Clients and asset consultants have been in constant contact with us regarding the need for an alternative benchmark which represents the broader opportunity set," Molloy said.
