ABN Amro has completed a property derivatives deal based in part on the Investment Property Databank (IPD) UK retail index, in what it claims is the first to be based on a specific sector of the market.Previous property derivatives deals have been based on the IPD all-property index, but many potential entrants to the market have complained that sector-specific deals would be far more useful than the API for balancing property portfolios and exploiting knowledge of property market dynamics.
ABN Amro performed a 15-month swap trade made up of £30 million exposure to the API and £30 million exposure to the retail sector index. The property derivatives joint venture between CB Richard Ellis and GFI, formed in June this year, acted as broker on the deal. ABN Amro said it will warehouse some of the risk involved. But the pricing for the transaction was not revealed.
ABN Amro's global head of credit trading, Charles Longden, expects a greater need for sector-specific trades with shorter maturities, saying demand should grow "significantly".
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