Hermes has launched its Property Derivatives Trading Forum, an initiative intended to accelerate the development of the UK’s nascent property derivatives market.
The forum has been established by Hermes to bring together the market leading institutional investors, property companies, investment managers, investment banks and property derivative specialists with the objective of trading all property and sub-sector derivatives on a virtual basis.
The forum will explore the latent demand for derivatives, generate visible pricing benchmarks for all property and the sub-sectors and grow the awareness and expertise of the leading players who are likely to form the core of any future Property Derivatives market.
Rupert Clarke, head of Real Estate at Hermes said, “As property investment markets become more sophisticated, a liquid and transparent derivatives market would offer a valuable investment management tool. However, most institutional investors and property companies today are reluctant to pursue property derivatives since they lack confidence in the market potential. Their reluctance is compound ded by a lack of in house expertise to formulate and execute an effective derivatives strategy. The Property Derivatives Trading Forum will help reveal the potential demand for derivatives from the key participants in the property market as well as give them first hand practical experience of formulating and executing a derivatives strategy in a ‘realistic’ market environment.”
The first trading day will be on 6 October and will be hosted by Credit Suisse First Boston with further sessions planned to be hosted by Deutsche Bank/Eurohypo and The Royal Bank of Scotland. The final trading day will be in May 2006, by which time it is expected that participants will have gained sufficient knowledge to complete real trades and have greater insight on the potential market and liquidity of property derivatives. The trading game will be run by GFI and ICAP, the specialist derivative broking houses, and IPD will be involved in overseeing analysis of results. Proceeds from the Property Derivatives Trading Forum will go to the Investment Property Forum.