The SGI Future Interest Rate Momentum GULF STREAM ( “FIRM GULF STREAM” ) is an equally-weighted composite of the SGI FIRM EUR 2 and SGI FIRM USD. It aims to benefit from the trends created on the short term interest rates by the European Central Bank (ECB) and the Federal Reserve (Fed) monetary policies. The index takes long or short positions in NYSE Liffe 3M Euribor Futures Contracts (for the SGI FIRM EUR 2) and CME Eurodollar 3M Futures contracts (for the SGI FIRM USD), depending on market conditions. Risk is dynamically managed for each component of this basket through a daily mechanism that aims to maintain volatility at around 3%.
The ECB and the Fed revise their refinancing rates periodically. These repeated moves create trends in short-term interest rates. The FIRM EUR 2 and FIRM USD strategies aim to make the most of these trends. Both the SGI FIRM EUR 2 and the SGI FIRM USD are based on 2 strategies:
- In order to capture these trends and generate performance, each sub-index takes long or short positions in NYSE Liffe 3M Euribor Futures Contracts (for the SGI FIRM EUR 2) or CME Eurodollar 3M Futures contracts (for the SGI FIRM USD), depending on market context.
- The Roll-down strategy: rolling long futures positions when rates are constant or decreasing generates a gain
Gulf Stream is the equally-weighted basket of SGI FIRM EUR 2 and SGI FIRM USD. Being exposed to both short term interest rates markets implies diversification.