As wealth managers continue to evaluate strategies that can help clients further diversify risk in portfolios and potentially hedge against the dollar's decline, Standard & Poor's is launching an index that is intended to enable "investors to participate in the returns of the U.S. equity market while hedging against a decline in the value of the U.S. dollar versus gold."
The S&P 500 Gold Hedged Index will mimic the returns of the S&P 500 and "long gold futures contracts," which hedge against the dollar's decline versus gold. It is not a hedge against "stock market risk," according to the December 3 announcement. , stated in the release: "In a gold-hedged strategy, investors are seeking to eliminate the risk of U.S. dollar fluctuations and are therefore willing to sacrifice potential currency gains against gold."
Futures can be a very efficient and economical way to gain or hedge exposure to certain parts of the market without the need to take physical delivery of a commodity, for example, or committing large amounts of capital to accommodate the full underlying investments.
UBS will develop S&P 500 Gold Hedged Index strategy products.
For more information please see the S&P Gold Hedged Index fact sheet.
Comments? Please send them to firstname.lastname@example.org. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.