LENWOOD VOLATILITY CONTROL INDEX™

Description

The Lenwood Volatility Control Index™ is sponsored by Index Methodologies, LLC and calculated by S&P Dow Jones Custom Indices under the ticker symbol LVCI. This total return index attempts to maximize returns by providing different exposures during different economic cycles using a transparent rules-based relative strength strategy to select and weigh up to four of the following assets on a monthly basis:

  1. S&P 500 Total Return Index

    Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500® focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. Market research has noted that the index could achieve performance in periods of economic expansion.

  2. S&P 500 Low Volatility Total Return Index

    The S&P 500 Low Volatility Index™ measures the performance of the 100 least volatile stocks in the S&P 500. The index is designed to serve as a benchmark for low volatility or low variance strategies in the U.S. stock market. Market research has noted that the index could achieve performance in periods of economic contraction.

  3. S&P 500 Equal Weight Total Return Index

    The S&P 500® Equal Weight Index (S&P 500 EWI) is the equally-weighted version of the widely regarded S&P 500. The index has the same constituents as the capitalization weighted S&P 500 Total Return Index, but each company in the S&P 500 EWI is allocated a fixed weight of 0.20%, rebalanced quarterly. Market research has noted that the index could achieve performance in periods of economic recovery.

  4. S&P 500 2-Year U.S. Treasury Note Futures Index
  5. S&P 5-Year U.S. Treasury Note Futures Index
  6. S&P 10-Year U.S Treasury Note Futures Index

A portfolio is constructed each month by ranking the risk adjusted trend scores, a simple moving average of performance over various time measurements, of the above six (6) components and the top four (4) ranks are given the following weights in the following month's portfolio:

1st place risk-adjusted trend score:40% of the portfolio
2nd place risk-adjusted trend score:30% of the portfolio
3rd place risk-adjusted trend score:20% of the portfolio
4th place risk-adjusted trend score:10% of the portfolio

If at least three risk adjusted trend scores of the six underlying components are negative, the component is removed from consideration in the portfolio and the allocation is shifted to the Cash Asset. The Cash Asset shall be invested at the US Dollar 3 Month London Interbank Offering Rate (LIBOR).

The index controls risk by targeting a specific level of volatility (7.0%) by dynamically allocating between the relative strength strategy and cash on a daily basis. Volatility is measured over the last 20 days.