The Liquidity and Sustainability Facility (LSF) announced a collaboration with S&P Dow Jones Indices (S&P DJI) on the development and launch of the iBoxx LSF USD African Sovereigns Index. The index tracks the performance of the universe of African Sovereign Eurobonds that the LSF accepts as collateral in the framework of repo transactions.
LSF is licensing the iBoxx LSF USD African Sovereigns Index to use as a benchmark for its repo facility. The index, which is owned and managed by S&P DJI, can be replicated to create index-based products such as exchange-traded funds (ETF).
“Deepening capital markets, by building infrastructure that facilitates the inclusion of developing economies in capital market instruments is crucial to mobilize cheaper and longer-term resources” said Vera Songwe, founder and chair of the LSF, in a statement. “Inclusion in indices is an important step towards increased profile and access to a wider range of investors for African Sovereign issuers and we hope for many other emerging markets as we expand.”
“S&P Dow Jones Indices is pleased to offer an index that provides broad coverage of the African Sovereign bond universe,” said Randolf Tantzscher, Fixed Income Product Management Team lead at S&P DJI, in a statement. “The specific methodology developed through the collaboration with LSF can offer good representation and inclusion of African nations with access to international markets.”
British Robinson, Prosper Africa coordinator, said in a statement: “The iBoxx LSF USD African Sovereigns Index will help investors benchmark the true risks and rewards from investing in a diversified portfolio of African hard currency sovereign debt. Addressing these information asymmetries will inevitably drive investment into Africa.”
“Market indices play a significant role in asset allocation. The adoption of new inclusive indices can allow investors to track the performance of a wider range of assets and support allocation to emerging markets and developing economies where it is most needed,” said Louise Walker, head of Private Sector and Capital Markets Department of the UK Foreign, Commonwealth and Development Office, in a statement. “Supporting the liquidity of African bond markets is essential for market development and improving the attractiveness and viability of the asset class.”
“This is a new development for the LSF that is fully aligned with its core missions,” said David Escoffier, CEO of the LSF Secretariat, in a statement. “We need instruments such as indices that bring additional transparency and liquidity to the market in order to crowd in more investors and effectively mobilize private capital to support the sustainable development of Africa.”
The LSF was designed with the dual objective of supporting the liquidity of African Sovereign Eurobonds on the repo market and incentivizing SDG-related investments such as GSS bonds on the African continent.