ROCKVILLE, Md. (HedgeWorld.com)–Rydex Investments, an investment advisory firm, is preparing the launch of a registered fund that will track the performance of the Standard & Poor’s Diversified Trends Indicator.
The S&P DTI is a benchmark for trends in the commodity and financial futures markets, designed by Alpha Financial Technologies LLC, Dallas.
Tracking the DTI will require that the new fund, the Rydex S&P Diversified Trends Fund, enter into short sales, futures, options, swaps and similar transactions, Rydex explained in a prospectus filed with the U.S. Securities and Exchange Commission Feb. 11.
It also said that “to collateralize Fund transactions on a day-to-day basis, the Fund will hold U.S. Government securities, short-term, high quality fixed-income securities, money market instruments, overnight and fixed-term repurchase agreements, cash, and other cash equivalents with maturities of one year or less” and that on “certain occasions” the fund might have to employ leverage.
The DTI employs a diversified portfolio of 24 futures contracts (“components”) formed into sectors that are designed to reflect and track (price) trends while maintaining low volatility. Exposure is divided equally between tangible commodities on the one hand and financials on the other in order to increase the internal non-correlation among the components and to add liquidity to the investment. Commodity sector