Northern Trust (Nasdaq: NTRS) announced that it can offer clients daily independent valuations for complex OTC property derivatives. The product which has been developed in response to an increasing trend for property funds to use OTC derivative instruments, is the latest in a series of enhancements to the suite of services Northern Trust offers real estate fund managers.
The product enables a transparent, daily independent valuation for complex IPD (Investment Property Databank) swaps. IPD is one of the most common benchmarks used for writing property derivative contracts in the UK and covers approximately 10 986 directly held UK property investments valued at around GB£117 billion.
“Property derivatives are notoriously difficult to value and as a result are written based on a real estate property index, such as the IPD index,” said Sascha Calisan, real estate fund administration product manager at Northern Trust.
“Our ability to now deliver independent valuations for IPD swaps on a daily basis is great news for the real estate industry, as typically the market data for daily valuations is sourced on a daily basis – a challenging task in what is still an illiquid market with few brokers – and is only publicly published once a month.”
Northern Trust provides administration services to over 250 real estate and infrastructure funds and related entities and can offer clients the following outsourced OTC activities:
Daily independent valuations for OTC derivative instruments including; IPD swaps, interest rate swaps, and interest rate caps and floors Active Collateral management Trade Capture Trade confirmation Reconciliation Trade event confirmation Risk analysis.
In addition, Northern Trust also offers a transparency report which highlights the market data attributes as well as the mathematical model and techniques that were used to calculate the price.
“We are seeing activity in the market from two opposite ends of the investment industry. Investment managers holding commercial property portfolios are looking to hedge the financing of these portfolios through real estate derivatives, and are now being joined by an increasing number of hedge funds.” said Peter Cherecwich, global chief operating officer for Northern Trust’s asset servicing business.
“This latest product development enables us to cut through the complex data associated with administrating property OTC derivatives and deliver the information fund managers require on a daily basis, helping them make timely investment decisions.”
Northern Trust provides derivatives processing solutions for over 450 clients worldwide.
For more information on this product or on our Jersey office, please contact Robert Lucas (Head of the Jersey Real Estate Department) on +44 1534 832 832 or RL9@ntrs.com.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2010, Northern Trust had assets under custody of US$3.7 trillion, and assets under investment management of US$647.3 billion. For 120 years, Northern Trust has earned distinction as an industry leader in combining exceptional service and expertise with innovative products and technology. For more information, visit www.northerntrust.com.