Scottish Widows And Legal And General Looking To Property Derivatives
While they are both looking at the property derivatives market for different reasons, it is interesting to see that major players such as Scottish Widows and Legal & General are taking a keen interest. A derivative is simply the option, but not the obligation, to buy or sell an asset at a future date in return for a ‘margin’ payment. The right to take up the option is decided by the investor and they can let the option lapse if not commercially viable.
It seems that Scottish Widows is looking at derivatives in order to increase their exposure to the property market, while at the same time retaining a fair amount of liquid cash in their investment funds. The derivatives in which they are dealing in are linked to a property index which tracks the UK property sector as a whole.
On the other hand it seems as though Legal & General are looking to play off expectations of a 7% fall in the market this year against an expectation of a property price fall in the region of 8% - which has been priced into the derivatives market by investors. If Legal & General are right then they stand to make a gain on the options.
Share this..
Related stories
Scottish executive under pressure as more job losses announced
When contact lens maker Bausch and Lomb today announced 500 job losses in West Lothian it is clear that nobody in the Scottish parliament expected this. The company is effectively transferring production from West Lothian to the US and Ireland as it looks to consolidate in these difficult economic times. However, a number of Scottish MPs are now calling on the Scottish executive to step in again a...
Read MoreWill British Airways Be Forced To Give Up Heathrow Slots?
British Airways has fought tooth and nail for years to keep its priceless runway slots at Heathrow but it seems that the US regulators looking at the proposed tie-up with American Airlines and Iberia are looking for major concessions. While they have British Airways over a barrel to some extent the rumoured demand for up to 10 Heathrow slots a day is something which British Airways is unlikely to...
Read MoreWill the increase in business confidence be enough for the banking sector?
A number of reports today suggest that UK business confidence is higher than at any time over the last two years and many are now starting to look ahead to the future with hope. However, there is still a requirement for the UK banking sector to release excess liquidity into the consumer and business arena to shore up businesses and allow refinancing of certain financial arrangements. But will the...
Read MoreHouse sales match peak of 1980s boom
Britain's property sales reached their highest number in 2006/07 since 1988, the year in which the property market took a nose dive, new figures show.Statistics from HM Revenue and Customs (HMRC) show that a total of 1,859,000 flats and houses were sold in the UK in 2006/07.In 1988 the number of homes sold in just England and Wales stood at a record level of 2,148,000. That figure dropped by more...
Read MoreCan the government engineer a recovery in time for the next election?
While politics and the prospects of the UK economy often go hand in hand with accusations that the economy can be manipulated for political means, would this be such a bad thing in the current environment?
With Gordon Brown having to call an election no later than 2010 we are already seeing many of the opposition parties suggesting he will try to engineer a short term recovery in or...