Indices to Measure Performance of Fixed Income Securities in Sri Lanka. Joint Project of NDB AVIVA Wealth Management and CRISIL Rating & Research Agency of India

18th January 2012, www.lankabusinessonline.com

Sri Lanka's NDB AVIVA Wealth Management is working with India's CRISIL rating and research agency to create indices to measure the performance of fixed income securities in the island.

Experts from CRISIL, a subsidiary of Standard and Poor’s, have already analyzed data from the Sri Lanka’s government security market and have proposed structuring four indices covering Treasury Bills and Bonds, a statement said.

CRISIL is already working in Sri Lanka and has developed internal rating models for sanctioning loans for Hatton National Bank and Nations Trust Bank, said Mukesh Agarwal, Senior Director of CRISIL Research.

They are also developing risk assessment models, he said during a visit to Colombo this week.

Bond markets in India and very similar to that in Sri Lanka being dominated by government securities and with comparatively low retail investor participation, Agarwal said.

"Secondary trading volumes (in both markets) are not much but volumes are going up. Corporate bond trading is a bit on the lower side," he told a forum organised by NDB AVIVA Wealth Management, a joint venture between National Development Bank and AVIVA Asia Holdings.

"Investors use our rankings for taking investment decisions. All Indian mutual funds use our bond valuations to value debt portfolios on a daily basis."

Aman Singhania, Manager of Funds & Fixed Income Research, said benchmarking would be useful for investors as measuring a fund's performance is as important as managing them.

"With newly launched funds, it can be difficult for investors to understand their risk - return. If there's a benchmark such as an index, investors can understand the risks."

CRISIL was considering separate indices to track the performance of benchmark bonds as well as track a portfolio of bonds, Singhania said.

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