Solactive’s new Fed Funds Effective Rate Index, created to follow the performance of a notional deposit in USD offering the Fed Rate, has been licensed to Lyxor Asset Management (Lyxor) to serve as the basis for a new exchange traded fund.
The new 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 has been listed on the Borsa Italiana in EUR and is expected to be listed on the London Stock Exchange on 10 July on the London Stock Exchange in USD and GBP.
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 (pictured), Head of Bond & Complex Indexing, Solactive, says: “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, adds: “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.”
