American insurer AIG has launched the AIG Emerging Markets Foreign Exchange Index in response to the growth of investor interest in emerging markets and foreign exchange as asset classes in recent years.
The new index aims to provide investors with a transparent, rules-based tool for passive exposure to emerging markets foreign exchange. The AIG-EMFX Benchmark Index (Benchmark Index) replicates the return of investing in an equally weighted basket of 19 emerging market currencies against the U.S. Dollar.
The company also claims that the index is effectively a vehicle for investors to access local money market-like returns without having to maintain local currency settlement facilities.
“The investor universe has moved significantly into emerging markets in recent years, but the array of index-based opportunities for EM exposure has not kept pace,” says Joseph Cassano, President of AIG-FP. “We are confident that the AIG Emerging Markets Foreign Exchange Index is going to help fill that void very effectively.”
The AIG-EMFXI currently includes the Argentine Peso, Brazilian Real, Chilean Peso, Colombian Peso, Mexican Peso, Chinese Yuan, Indian Rupee, Indonesian Rupiah, Korean Won, Philippine Peso, Taiwan Dollar, Thai Baht, Czech Koruna, Hungarian Forint, Polish Zloty, Slovak Koruna, Israel Shekel, Russian Ruble, South African Rand, and Turkish Lira.
According to AIG-FP, estimated historical returns of the Benchmark Index would have been comparable to, and highly correlated with, other EM asset classes yet with lower volatility.