Main characteristics
| Bloomberg Code | SGIXMOUS |
|---|---|
| Inception Date | 01/02/2012 |
| Return Type | Excess Return |
| Currency | USD |
| Calculated By |
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Objective
The SGI MOnetary policy Driven strategy USD (“MOD USD”) index is a systematic strategy on short term USD interest rates that seeks to exploit the non realisation of the 3M interest rate forwards by taking into account the momentum tendencies in the short term interest rate market. The strategy takes long or short positions on CME Eurodollar 3M futures Contracts. Risk is dynamically managed through a daily mechanism that aims to maintain volatility close to 3%.
Mechanism
The Federal Reserve (Fed) revises its target Fed Fund rates periodically. These moves create trends in short-term interest rates. Whenever the Fed is starting to hike or cut its target rate, it is generally maintaining the same trend over several months. The MOD USD strategy aims to make the most of this continuity. The index is based on 2 performance engines:
- The Roll-down premium: rolling long futures positions when rates are constant or decreasing generally generates a positive gain.
- The Trend Following strategy In order to capture the trends created on the short term interest rates markets, the strategy takes long or short positions on CME Eurodollar 3M futures contracts, depending on the direction of the Fed revisions of its target rate
The SGI MOD USD (USD - ER) (The “Index”) is the property of SG, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) (“S&P Dow Jones Indices”) to maintain and calculate the Index. S&P® is a registered trademarks of Standard & Poor’s Financial Services LLC (“SPFS”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and these trademarks have been licensed to S&P Dow Jones Indices. “Calculated by S&P Dow Jones Indices Custom” and its related stylized mark(s) are service marks of S&P Dow Jones Indices and have been sublicensed for certain purposes by SG. Neither S&P Dow Jones Indices, SPFS, Dow Jones nor any of their affiliates shall be liable for any errors or omissions in calculating the Index.