The Index is comprised of shares of ETFs and a hypothetical overnight cash investment (the “Money Market Position”) which constitute the underlying assets. The underlying assets provide exposure to several asset classes as described below:
• Equities including U.S. and international developed equity markets
• Fixed Income including U.S. Treasuries, and investment grade and high yield corporate and government bonds
• Emerging Markets including emerging market equities and emerging market fixed income
• Commodities including exposure to 14 commodity contracts and physical gold
• Alternatives including real estate securities, master limited partnerships focused on energy, and a senior leveraged loan portfolio
• Inflation with U.S. Government inflation-linked securities
• Cash Equivalent with the Money Market Position
Using a methodology (the “Methodology”) developed by Goldman, Sachs & Co. (the “Index Sponsor”), the Index seeks to provide exposure to price momentum of these markets by reflecting the combination of underlying asset weightings that would have provided the highest historical return, subject to constraints on maximum and minimum weights and volatility controls further described below.
Each month the index is rebalanced by calculating the portfolio of underlying assets that would have provided the highest historical return during a look-back period comprised of the prior six months, subject to a limit of 5% on the realized volatility of the aggregate of such underlying assets over three different look-back periods (the prior six months, three months and one month) and subject to a maximum weight for each underlying asset and each asset class. This results in three potential portfolios of underlying assets (one for each look-back period). The weight of each underlying asset for each monthly rebalancing will equal the average of the weights of such underlying asset in these three potential portfolios. In addition, if on any index business day the prior one month period realized volatility of the index at that time exceeds the volatility cap of 6%, the index will be rebalanced in order to reduce such realized volatility by ratably reallocating a portion of the exposure to the ETFs comprising the index at that time to the Money Market Position.
The Index is calculated on an excess return over 3-month Libor basis, with dividends reinvested.
Please note that the index chart above may be partly comprised of historical performance illustration based on a backtest. The guideline provides an indication where this is the case.