The SGI Alternative Beta Index (the Index) attempts to track the performance of the hedge fund industry as a whole and is designed for strategies that seek to take a long position in this market segment. To achieve this objective, the Index uses an algorithmic model which is designed to replicate the performance of a hedge fund industry benchmark (for example, a hedge fund index) through hypothetical investment in a range of underlying assets. The Index is not a managed hedge fund or similar vehicle.
The Index uses an algorithm which compares a proxy for the investable portion of the hedge fund industry (the Target Index Benchmark) to a list of market and notional indices (each, a Component) and determines the target exposure of the Index to each Component in an attempt to replicate, on a monthly basis, the Target Index Benchmark. The list of Components and their target exposures are reviewed monthly by an Index Committee consisting of 2 members from Société Générale and 1 member from Standard & Poor's, as Index Calculation Agents (the Index Committee) in accordance with a predefined process. The exposure of the Index to the Components is adjusted in accordance with a dynamic exposure policy designed to keep volatility as close to 6%. The universe of Target Index Benchmarks and Components is subject to change by the Index Committee.