ABN AMRO, the first bank to establish a dedicated property derivatives trading desk, has pioneered the first sector-specific property derivatives trade.
The 15-month swap trade comprises a £30m exposure to the IPD All-Property index and a £30m exposure to the retail sector. ABN AMRO will warehouse some of the risk involved in the transaction, acting as a true marketmaker rather than a broker. Pricing and the counterparties remain confidential.
“Investors can now re-balance their portfolios to take advantage of different return profiles among UK property sectors and make tactical and strategic switches depending on their market forecasts,” said Rawle Parris, executive director at ABN AMRO.
“There is a great need for sector-specific trades with shorter maturities. We expect demand to grow significantly,” added Parris.
Mike Levi, head of property derivatives CBRE-GFI, which acted as broker on the deal, said: “This is a massive breakthrough that puts us ahead of schedule. There are more sector-specific deals in the pipeline.”
