The SGI Alternative Beta - Shortable Index (the Index) attempts to track the performance of the hedge fund industry as a whole and is designed for strategies that seek to short 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.