The Solactive Flight to Safety index is a combination of the Solactive US Large & Mid Cap Utilities index, the Solactive US 20+ Year Treasury Bond index and the LBMA Gold Price PM.
Offering a defensive strategy against economic downturns, the multi-asset index offers is comprised of utility stocks, US treasury bonds and commodities.
The index’s rebalancing method is based on the volatility of each component over the last five years. Solactive overweights the components with the lowest volatility for the period as well as underweights the most volatile constituent.
Additionally, a cap has been implemented for the LBMA Gold Price PM at 22.5% to prevent an overweight of the commodity.
Direxion has launched the Direxion Flight to Safety ETF (FLYT) in the US which tracks the recently launched index. FLYT has an expense ratio of 0.3%.
Timo Pfeiffer, chief markets officer at Solactive, said in a statement: “The Solactive Flight to Safety index is an appropriate tool for defensive investors seeking to support their portfolio against economic disturbance.
“This strategy could become handy in 2020, as both the macroeconomic outlook is deteriorating and asset prices across all asset classes are already elevated.”