Opinion: OSFI and the Bond Indices

OSFI wants to include contingent capital in the bond indices … even though Contingent Capital issues are not bonds!

Look for the opinion link!

Also available is the draft version with footnotes

The article has also been published on-line by Advisors’ Edge Report with the title OSFI Targets Bond Investors.

Update, 2011-6-21: Investors with an interest in the subject are urged to read Rowland Fleming’s explanation of how Bre-X became an index constituent.

Update, 2015-4-26: In the article, I attempt to differentiate between “good indices” and “bad indices”; the proliferation of ETFs has caused a corresponding proliferation of indices, which concerns a few US-based heavyweight lobbies:

ETFs – Since the Commission first permitted the creation of exchange-traded funds through an exemption from the Investment Advisers Act, well over a trillion dollars have been invested in these funds. ETFs, which were originally conceived as plain vanilla, index-tracking investments, can offer significant benefits to retail investors. In recent years, however, the Commission staff has approved through ad-hoc exemptive orders new and exotic versions of ETFs, many of which pose significant risks that are likely to be poorly understood by unsophisticated retail investors. For example, Commission staff has permitted ETF providers to: create their own indices just so they can create an ETF to track those indices, create inverse and leveraged ETFs, and even create actively managed ETFs.

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