S&P Indices announced Wednesday the launch of the S&P 500 Oil Hedged Index, calculated as a combination of a long S&P 500 position overlaid with long positions in NYMEX Oil futures and ICE Brent Crude Oil futures.
The S&P 500 Oil Hedged Index seeks to reduce the effects of a rise in inflation, as reflected in higher oil prices, or against declines in the value of the U.S. Dollar by simulating the returns of an investment strategy that is long the S&P 500 and hedged against changes in the U.S. Dollar, as measured by oil prices. By holding long oil futures contracts, investors may benefit from an increase in oil prices or potentially sustain losses when the opposite occurs.
The Index uses NYMEX Crude Oil and ICE Brent Crude Oil futures as a hedge. The hedge position has 50% in NYMEX Crude Oil and 50% in ICE Brent Crude Oil at the close of each rebalancing day. The hedge only protects against adverse movements in the relative value of the U.S. Dollar, as expressed in the dollar price of oil. Stock market risk is not hedged in any way.
"Investors are increasingly looking for alternative methods to hedge against inflationary risk during this period of global economic uncertainty," says Alka Banerjee, Vice President at S&P Indices. "We would expect funds that replicate returns on the S&P 500 Oil Hedged Index to provide investors with a means to mitigate the potential negative impact on an investor's portfolio resulting from a rise in inflation or decline in the U.S. Dollar."
The S&P 500 Oil Hedged Index belongs to the S&P U.S. Index family. Other closely related S&P indices include British Pound, Canadian Dollar, Euro, Yen, and Gold hedged S&P 500 indices.
S&P Indices, a world leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor's family of indices, which includes the S&P 500, the world's most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry's most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds.
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