Barclays Capital has recently announced the launch of an emerging markets index series covering inflation-linked government bonds. The series is the first of its kind—there are other emerging markets fixed-income indexes, but they do not cover inflation-linked debt.

The series has three tiers—individual country indexes, regional indexes and the broad Barclays Emerging Market Government Inflation-Linked Bond benchmark index. The benchmark index currently includes 43 bonds from Argentina, Brazil, Chile, Colombia, Mexico, Poland, South Korea, Turkey and South Africa. (The South Africa Barclays/BESA South African Inflation-Linked Bond Index was launched separately in 2005.) Latin America is the biggest region, representing roughly 90% of the index, while Brazil is the largest country at approximately 66% of the index. 

Waqas Samad, the head of index products for Barclays Capital, said a lot of the interest in and impetus for the new index series has come from pension funds that have been using Barclays' inflation-linked bond indexes covering developed markets. Because of their diversification needs, they are interested in similar products for emerging markets. Pension funds and institutional investors in general favor inflation-linked debt because they offer an opportunity to hedge against inflation, preserving the wealth of the portfolio.

"Our leadership position in inflation means that we are ideally suited to come to the market with these products," Samad says.