Main characteristics

Bloomberg code SGMACRO
Inception date 08/28/2020
Return type Excess Return
Currency USD
Calculated by S&P Dow Jones

Objective

As markets grow and evolve, the right investment decision changes as well. The economy has historically moved in cycles. As a result, investors need to adapt their portfolio in smart, creative ways. The SG Macro Compass Index (the “Index”) is the first global multi-asset index designed to identify these changes in the economic cycle and rotate asset class allocations to potentially perform in varying market environments.

The Index offers diversification across global asset classes to give its portfolio resilience to events that only impact some countries or assets. In addition, it uses fundamental indicators to assess the current market environment and rotate among three conviction-based, outlook-specific portfolios: Expansion, Contraction, and Neutral.

As a result, the SG Macro Compass Index combines a robust allocation model with a calibrated portfolio of assets to deliver the power of adaptive risk allocation in a fully systematic, rules-based index.

Mechanism

Each quarter, the rules-based Index observes expected changes to real GDP and inflation based on data from the Federal Reserve Bank of Philadelphia to determine the signal it uses systematically to adjust its asset allocation.  Higher real GDP expectations usually boost equity prices by boosting future earnings expectations broadly. Conversely, lower real GDP expectations usually decrease equity prices.  Weaker inflation expectations reduce the discount rate of future returns, driving up the present value of assets. Conversely, stronger inflation expectations increase the discount rate of future returns.

  • When real GDP is expected to rise and inflation is expected to fall, the signal points to an expansion phase that allocates to a growth-seeking portfolio to capture potentially rising asset prices.
  • When real GDP and inflation have contradictory indicators, the signal points to a neutral phase as this implies a lack of conviction by the model, and thus leads to a traditional risk-balanced allocation.
  • When real GDP is expected to fall and inflation is expected to rise, the signal points to a contraction phase that allocates to a defensive portfolio to preserve gains against potentially falling asset prices.

Once the Index determines the quarterly macro outlook, the Index rotates among three static conviction-based, outlook-specific portfolios. The portfolios are diversified across geographies, asset classes, and objectives.

  • Note: Rather than invest directly in the underlying assets, the Index tracks the performance of subindices, which themselves each track an asset or group of assets. Please refer to the Appendix for more information.

The Index aims to consistently perform in varying market environments.

 

RISK WARNINGS*

  • Neither the SG Macro Compass Index (the “Index”) nor any of the components comprising the Index are guaranteed to yield specific results. There can be no assurance that the Index will be successful.
  • The Index is comprised of notional assets. The exposure to the Core Strategy that tracks the excess return of the underlying assets is purely notional. There is no actual portfolio of assets to which any person is entitled or in which any person has any ownership interest.
  • The Index is an “excess return” index and not a “total return” index. In general, returns from investing in futures contracts are derived from three sources: (1) changes in the price of such futures contracts (known as the "price return"), (2) profit or loss realized when rolling from a futures contract with one expiry date to another futures contract with a different, generally later, expiry date (known as the "roll return") and (3) interest earned on the cash (or other) collateral deposited in connection with the purchases of such a futures contract (known as the "collateral return"). The component sub-indices of the Index (the “Index Components”) generate "excess return", meaning the sum of the price return and roll return with respect to the Index Components. As a result, an investment in an instrument linked to the Index will not generate the same returns that would be obtained from investing directly in future contracts underlying the Index Components because the collateral return is not used in calculating an "excess return" index.
  • The Index performance reflects the price evolution of the assets composing the Core Strategy. The Fed Funds Effective Rate is then deducted from the Index performance which means that the Index will not generate the same return that would be obtained from investing directly in the assets composing the Core Strategy.
  • The Index allocation model may lead to an unfavorable positioning in stressed markets when correlations are high between asset classes or countries, which is when a diversified approach is out of favor (e.g., a very narrow market).
  • The indicator the Index relies on for its allocation decisions are founded in academic research, but there is no guarantee that they will remain strong drivers of market conditions in the short or long term. As such, the positions taken by the index may reduce potential growth or increase potential losses.
  • By design, multi-asset portfolios tend to have less reliance on equity-risk. Compared to equity-only strategies, a global diversified multi-asset strategy may underperform in highly bullish equity markets.
  • The Index features a volatility control mechanism that is intended to stabilize the volatility of the Index around 5%. Because this mechanism is based on historical volatility, and subject to a limit on leverage of 200%, the volatility of the Index may not equal its volatility target. As a consequence and depending on market conditions, the Index may be underexposed to the Core Strategy during periods of volatile growth and overexposed in periods of steady market decline. The maximum exposure of the Index to the Core Strategy is +200%. When the Index is underexposed, a part of the assets of the Index will not be invested and therefore will not earn any return. While the volatility control applied by the Index may result in less fluctuation in rates of return as compared to indices without volatility controls, it may also reduce the overall rate of return as compared to products not subject to volatility controls.
  • The leveraged exposure may amplify rising as well as decreasing market movements. Investors may be overexposed to negative market conditions and therefore bear amplified losses.
  • Prior to investing in the Index or purchasing any products linked to (or based on) the Index, investors and consumers should seek independent financial, tax, accounting and legal advice.
  • In calculating the performance of the Index, SG deducts fixed transaction and replication costs, each calculated and deducted on a daily basis. The transaction and replication costs cover, among other things, rebalancing and replication costs. The total amount of transaction and replication costs is not predictable and will depend on a number of factors, including the leverage of the Index, which may be as high as 200%, the performance of the indexes underlying the Index, market conditions and the changes in the macro outlook, among other factors. The transaction and replication costs, which are increased by the Index’s leverage, will reduce the potential positive change in the Index and increase the potential negative change in the Index.
  • Certain extraordinary and disruption events may impact the calculation of the Index.
  • The Index is subject to risks associated with non-U.S. markets. Some of the component sub-indices of the Index are denominated in currencies other than USD. In order to publish levels in USD, the Index systematically converts the returns of these components from their currency to USD. This may produce a gain or loss due to the exchange rate risk inherent in such conversions.
  • The Index lacks substantial operating history and, as it is based on complex algorithms, may perform in unanticipated ways. Neither this document nor the issuance of any investment product with returns linked to the Index should be deemed as investment advice or as an assurance or guarantee by SG or any of their respective affiliates that an investment linked to the Index will generate a positive return.
  • The Index was launched on 8/28/2020. Therefore, all data for the Index prior to launch date represents the application of the Index methodology by Societe Generale in order to reconstruct hypothetical historical data. This back-tested, hypothetical, historical data has inherent limitations and is provided for illustrative purposes only. Results during these periods may have been different (perhaps considerably) had the Index actually been in existence. Unlike actual performance records, hypothetical or simulated performances, returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints.
  • The roles of the different teams involved within Societe Generale in the design, maintenance or replication of the Index have been strictly defined. Where Societe Generale holds a product having the Index as its underlying and other positions exposing it to the Index for its own account, the replication of the Index is made in the same manner by a single team within Societe Generale, be it for the purpose of hedging the product held by external investors and consumers or for the purpose of the positions held by Societe Generale acting for its own account. Societe Generale may take positions in the market of the financial instruments or of other assets involved in the composition of the Index, including as liquidity provider.
  • Publicly available information on the Index and its methodology is limited.

*Indicative risk factors summary only. The risk factors are not complete and you should read the risk factors contained in a final offering document prior to investing in any products linked to the Index. This presentation is provided for information purposes only and does not purport to summarize or contain all of the provisions that would be set forth in a final offering document.

 

IMPORTANT NOTICE

The SG Macro Compass Index (the “Index”) is the exclusive property of SG Americas Securities, LLC (together with its affiliates, “SG”). SG has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) (“S&P”) to maintain and calculate the Index. The Index is not sponsored, promoted, sold, or supported in any other manner by S&P, nor does S&P offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or trademarks of the Index or the levels of the Index at any time or in any other respect. “SG Americas Securities, LLC”, “SGAS”, “Société Générale”, “SG”, “Société Générale Indices”, “SGI”, and “SG Macro Compass Index” (collectively, the “SG Marks”) are trademarks or service marks used by SG.

This document does not constitute an offer, a solicitation, an advice or a recommendation from SG to purchase or sell the Index, which cannot be invested in directly, or any product linked to the Index. This document is provided solely for informational purposes to describe the principles and main financial characteristics of the Index. The information herein does not purport to summarize or explain the methodologies governing the Index. The Index rules define the calculation principles of the Index and the consequences of extraordinary events which may affect the Index. SG reserves the right to amend or adjust the Index methodology from time to time and accepts no liability for any such amendment or adjustment. SG is not under any obligation to continue the calculation, publication or dissemination of the Index and accepts no liability for any suspension or interruption in the calculation thereof. SG does not accept any liability in connection with the publication or use of the level of the Index at any given time. The Index rules are available upon request from SG.

You should conduct your own independent investigation and analysis of the potential consequences of any relevant risks such as those mentioned above, particularly in light of the ongoing industry initiatives related to the development of alternative reference rates and the update of the relevant market standard documentation.

SG may license the Index to one or more unaffiliated third party companies (each, a “Company”) for use in a product offered or issued by the Company (each, an “Index Product”). The Index Products are not, in whole or in part, sponsored, promoted, solicited, negotiated, endorsed, offered, sold, issued, supported, structured or priced by SG or any third-party licensor of information to SG.

SG may enter into derivative transactions or issue financial instruments linked to the Index. If you are considering investing in a product whose performance is based in whole or in part on the Index, you should refer to the full offering document for important information concerning such investment, including related risk factors. Such risks include, without limitation, risk of loss of some or all of your investment, risk of adverse or unanticipated market developments, risk of counterparty or issuer default and risk of liquidity. In addition, prior to making any investment in a product having the Index as underlying, you should make your own appraisal of the risks from a legal, tax and accounting perspective, without relying exclusively on the information contained herein, by consulting, if you deem it necessary, your own advisors in these matters or any other professional advisors.

This material describes certain services and products available from SG and should in no way be read as investment, financial, business, legal, regulatory, tax, accounting or other advice or a recommendation to enter into any transaction. SG does not, and will not, act as a fiduciary with respect to any employee benefit plan, individual retirement account or fund that holds the assets of any such plan or account (each, a “Plan”), unless it expressly agrees in writing to act in such capacity. The fiduciary of any such Plan must make an independent determination as to the advisability of entering into any transaction of the type described herein. Plans entering into any transaction with SG will be required to represent that the transaction is not prohibited under applicable law and/or the organizational documents and investment guidelines and/or restrictions applicable to the Plan.

Unless expressly agreed in writing, SG is not acting as an advisor or in an advisory capacity to any recipient of this document. In particular, SG is not acting as your fiduciary under Section 15B of the Securities Exchange Act of 1934, as amended (the “Act”), and our relationship will not otherwise be subject to the provisions of such Section 15B, the rules thereunder, or the rules issued by the Municipal Securities Rulemaking Board that relate to the provision of advice to municipal entities or their obligated persons.

SG believes that the information in this document is reliable but makes no representation or warranty as to whether the information is current, accurate or complete. SG is under no obligation to update, modify or amend this communication or to otherwise notify you that any matter contained herein has changed or subsequently become inaccurate. The figures relating to past performances and simulated performances refer to past periods and are not a reliable indicator of future results. The level of the Index may fluctuate significantly due to the volatility of the market parameters and the value of the reference underlyings.

Statements contained in this presentation (including those relating to current and future market conditions and trends with respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of SG. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Certain information contained herein constitutes "forward-looking statements," or statements of opinion or intention which can be identified by the use of terms such as "may”, “will", "should", "seek", "expect", "anticipate", "forecast", "project", "estimate", "intend", "continue," "target', "plan" or "believe" (or the negatives thereof) or other variations thereon or comparable terminology. Due to changing circumstances or various risks and uncertainties, actual events or results, market conditions or actual performance of any actual investment may differ materiality from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to future performance or such forward-looking statements. NEITHER SG NOR ANY OF ITS AFFILIATES, OFFICERS OR EMPLOYEES MAKES ANY REPRESENTATION OR WARRANTY CONCERNING THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY STATEMENT OR INFORMATION CONTAINED HEREIN. NEITHER SG NOR ANY OF ITS AFFILIATES, OFFICERS OR EMPLOYEES ACCEPT ANY LIABILITY WHATSOEVER FOR ANY DAMAGES OR LOSSES ARISING FROM THE RECEIPT OR USE OF THIS DOCUMENT AND INFORMATION.

A product having the Index as an underlying may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or in said countries. It is the responsibility of the investor to ascertain that such investor is authorized to invest in such a product.

If you are a “U.S. Person” (as defined by the U.S. Commodity Futures Trading Commission), please visit http://swapdisclosure.sgcib.com for important information with respect to derivative products. By transacting with SG, you are deemed to acknowledge that you have read and accepted the information contained in the disclosure documents on this website.

Secondary Market: Upon issuance, our products may not have an established trading or secondary market. SG and its affiliates cannot assure investors that a trading or secondary market will develop for each of our products or, if one develops for any of our products, that it will be maintained. SG and its affiliates are under no obligation to develop or maintain any secondary or trading market for any of our products.

© 2021 Société Générale ("SG"), SGAS and their affiliates. SG CIB is the Corporate and Investment Banking arm of SG. Certain services described herein are provided by SGAS, a US registered broker-dealer, member of the NYSE, FINRA and SIPC, and a wholly owned subsidiary of SG. Services provided outside the US may be provided by affiliates of SGAS.

If you wish to report a Complaint to SGAS, please use the following link:  www.sgasdisclosures.com

The Index is the sole and exclusive 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 trademark 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. The Index is not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of McGraw-Hill, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the owners of the Index or any member of the public regarding the advisability of investing in securities generally or in the Index particularly, or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to SG is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which is determined, composed, and calculated by S&P without regard to SG or the Index. S&P has no obligation to take the needs of SG or the owners of the Index into consideration in determining, composing, or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Index to be issued or in the determination or calculation of the equation by which the Index is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing, or trading of the Index.

REGARDING HYPOTHETICAL SIMULATIONS: Prospective investors should be aware that any hypothetical performance data included in this document is derived from the economic environment and the simulated historical data that prevailed in the period following the date of the relevant simulation. Accordingly, although the graphs and simulated results herein may be useful in order to gain some historical perspective, past performances of the Index and the hypothetical historical performance data presented should not be taken as indicative of future performance of the Index. It is impossible to predict whether the value of the Index will rise, fall or remain flat.

The hypothetical historical performance data presented in this communication have not been verified by any other independent third party. Hypothetical historical results have their inherent limitations. These hypothetical back-tested results are determined by means of a retroactive application of a back-testing model designed with the benefit of hindsight. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate or accurate. Hypothetical back-tested results are neither an indicator nor guarantee of future returns or future performance. Actual results will vary, perhaps materially, from the hypothetical analysis.

The hypothetical examples, scenarios or figures herein are provided for illustrative purposes. They allow an understanding of the Index’s mechanism and how the Index would have performed during different market stages over previous years, excluding taxes and expenses. They are NOT an estimate or forecast of the future performance of the Index and have no contractual value. There is no assurance that a transaction will be entered into on any indicative terms.

The hypothetical simulations of the Index described in this document take into account certain transaction costs that are built into the Index. THESE PRICES REPRESENT A PRO FORMA VALUE AND TAKE INTO ACCOUNT PRO FORMA MAINTENANCE, REPLICATION AND TRANSACTION COSTS ON THE UNDERLYING PRICING PARAMETERS WHICH ARE APPROXIMATIONS BASED ON HISTORICAL OBSERVATIONS. Actual results including actual transaction costs and the precise methodologies will vary, perhaps significantly, from the hypothetical historical data set forth herein. This document is furnished to you solely for purposes of discussion in order to determine your preliminary interest in the Index.


Note: Before December 5, 2005, the performance of the Generic 1st ‘UB’ Future (UB1 N:04_R_0 Comdty) was used in place of the IND1BUB Index, for which no simulated performance exists prior to December 5, 2005. Both indices track the performance of rolling futures contracts on German debt.

Source: Societe Generale from 7/15/2002. All results are calculated for periods ending as the date above. The SG Macro Compass Index was launched on August 28, 2020 and any performance prior to such date is hypothetical. This backtested, hypothetical, historical data has inherent limitations and is provided for illustrative purposes only. It should not be read as a guarantee or an indication of the future performance of the SG Macro Compass Index. Results during these periods may have been different (perhaps considerably) had the strategy actually been in existence. Unlike actual performance records, hypothetical or simulated performances, returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints. THE FIGURES RELATING TO PAST PERFORMANCES AND/OR SIMULATED PERFORMANCES REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR OF FUTURE RESULTS. PLEASE REFER TO CAUTIONARY STATEMENTS REGARDING HYPOTHETICAL SIMULATIONS UNDER "IMPORTANT NOTICE" AT THE END OF THE WEBPAGE.