S&P Indices has launched the S&P Systematic Global Macro Index (SGMI), a new gauge to reflect price trends of highly liquid global futures, representing the general level of volatility taken by managers in the global macro and managed futures/commodity trading advisor (CTA) space.
This rules-based index has been designed to underlie investment products, including structured products: "We envisage that new products based on this index will give investors the ability to invest in a long/short, comprehensive set of the main futures contracts," said Jodie Gunzberg, director of commodities at S&P Indices. "It's liquid, tradable and it isn't just based on commodities, but is well diversified across the six main asset classes in the futures markets."
Gunzberg also said the systematic global-macro space has had little correlation to traditional asset classes with relatively small drawdowns as compared with long-only equities or commodities.
The SGMI is diversified globally across 37 constituents within the six most widely traded sectors: commodities, energy, fixed income, foreign exchange, short term interest rates and equity indices. Each constituent may be long, short or flat to indicate its trend.
To establish the weight of each constituent the index will apply an even risk capital allocation by sector and to each constituent within each sector so that no single sector or constituent drives the volatility of the index. The even risk capital allocation uses an index target volatility with available leverage of up to 300%, enabling the closest volatility match given a potentially low average correlation across the constituents. The sectors and constituents within the S&P SGMI are rebalanced monthly.
S&P Indices acquired the methodology underlying the S&P SGMI from Thayer Brook Partners LLP.