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Solactive AG has launched the Solactive Fed Funds Effective Rate Index, created to follow the performance of a notional deposit in USD offering the Fed Rate, including daily reinvestment of interests earned, and licensed to Lyxor Asset Management (Lyxor).
The Solactive Fed Funds Effective Rate Index is composed of cash in USD, accruing interests on a daily basis. The Index is followed by the Lyxor Fed Funds US Dollar Cash UCITS ETF which is listed today on Borsa Italiana in EUR and expected to be listed on the 10th of July on the London Stock Exchange in USD and GBP (FEDF IM, FEDF LN and FEDG LN, respectively).
The Federal Funds Rate is the interest rate at which depository institutions lend funds to their counterparts, which are kept at the Federal Reserve, usually overnight. Considered as the base rate of the US economy, the Fed Rate has a significant influence on both the monetary and financial situations in the United States. Following recent statements from Janet L. Yellen*, Chairwoman of the Federal Reserve, experts have been expecting a raise of the Fed Rate in the upcoming months, which has not been increased since 2006. Within this framework, the launch of this new Lyxor ETF will give access to European actors to Fed rates while playing the existing USD/EUR exchange rate.
Astrid Ludwig, Head of Bond & Complex Indexing, Solactive, said: “We were delighted to have been given the opportunity to leverage our expertise in fixed income to create a new tailor-made index for Lyxor, the Solactive Fed Fund Effective Rate Index, which was designed as an tool to offer an exposure to a US Cash Deposit.”
Arnaud Llinas, Head of Lyxor ETFs and Indexing, added: “Lyxor which is continuously expanding its fixed income range, now makes available a new solution for investor’s USD liquidity management needs, through an ETF. We are pleased to further develop our cooperation with an index provider such as Solactive, in order to bring with this product an efficient exposure to the total return of a USD deposit paying the Fed Rate.”
Based on 1,000 at the close of trading on 31st December 2009, the Index was launched on 10th February 2015. The Solactive Fed Funds Effective Rate Index is a Total Return Index calculated in USD. For more information, please visit the Index webpage.
* Chair Janet L. Yellen At the "The New Normal Monetary Policy," a research conference sponsored by the Federal Reserve Bank of San Francisco, San Francisco, California, March 27, 2015 -- Normalizing Monetary Policy: Prospects and Perspectives
