Methodology Change | Solactive OFI Basket Precious Metals Strategy Index | Effective Date 10/04/2024

Today, on the 25/03/2024, Solactive announces the following changes to the methodology of the following indices (the ‘Affected Indices’) which were determined by a Market Consultation:

 Rationale for the Methodology Change

Target weights of Palladium and SOFR futures will be switched. The Palladium market environment has deeply changed in the past months and the palladium market is less and less considered as a precious metal.

The palladium is considered a precious metal, because it is rare and used in jewelry. But its use in jewelry is less and less important. Today, the main palladium use by far is for an industrial use, which is to produce catalytic converter. As such, it is more and more aligned with industrial metals and less and less in line with precious metals performance. For example, the correlation between gold and palladium is down to 20% at the end of 2023, on 52 weeks period.

What’s more, as palladium is mainly used to make catalytic converter (more than 80% of all of the palladium is used for this industrial purpose), the future of this metal is less and less obvious: the shift from ICE (internal combustion engine) vehicle to electric vehicle will make it less and less useful, making it less and less representative.

However given palladium is still considered a precious metal and still used in small quantities for jewelry, a small exposure to palladium will be kept in the index.

The weight change is implemented over a 30 day period starting on the 10th April 2024 where the weights are adjusted by 0.5% for SOFR and Palladium futures to ensure the tradability of the index.

Changes to the Index Guideline

The following Methodology changes will be implemented in the following points of the Index Guideline (ordered in accordance with the numbering of the affected sections):

1.1 Scope of the index

“[…]

The index is aimed at replicating the performance of a precious metals basket, including gold, silver, platinum and palladium. Weights are 35% for gold and 20% for silver and platinum. The basket is also exposed to the  SOFR 3M future contract with 20% weight and to palladium with 5%.

[…]”

5.1 Index Components

5.3 Palladium weight Adjustment

The change of weights of Palladium and SOFR futures was implemented over a 30 day period with increases/decreases of 0.5% per day, starting on COB 10/04/2024 and ending on 22/05/2024.