Solactive H2O Fixed Income 7% RC Index | Announcement of 12/10/2020 | Effective Date: 14th October 2020
The Solactive H20 Fixed Income 7% RC Index (ISIN: DE000SLA9YM9) (the “Affected Index”) aims to track the performance of a basket comprised of the H2O MultiBonds Fund (ISIN: FR0013393329) and the H2O Adagio Fund (ISIN: FR0013393188) (the two funds together the “Underlying Funds”) which both have a focus on Fixed Income securities and applies an additional risk control feature to achieve the target volatility of 7%.
From 28 August 2020 until 22 September 2020 the management company of the Underlying Funds, H2O Asset Management, published several announcements with regard to the Underlying Funds. It was that the two funds will spin-off so called side-pocket funds as of 13th October 2020. These side-pocket funds will bundle the private and more illiquid securities previously held by the Underlying Funds.
The side-pocket mechanism consists in splitting each Underlying Fund into two UCITS: a mirror UCITS with daily liquidity that will duplicate H2O’s Global Macro investment strategies (the “Parent Fund”), and a side pocket that will carry the private and more illiquid securities (the “Side-Pocket Fund”) , with the objective to sell the securities at the best possible price, in the shortest timeframe, and in the best interests of the investors and to dissolve the Side-Pocket Funds.
The proceeds from selling parts of the Side-Pocket Funds will be reinvested to the respective Parent Fund based on the ratio of the NAVs of the Side-Pocket Fund to the sum of the NAVs of the Side-Pocket Fund and the Parent Fund as of the day a transaction in the Side-Pocket Fund takes place.
Further information on the Underlying Funds can be found on the website of H2O Asset Management:
Solactive AG qualifies this event as a “Creation of a new Class or Series Event” as described in the index methodology of the Affected Index. The following paragraphs provide details on how this event is reflected in the index methodology in the future.
The spin-off of the Side-Pocket Funds requires an adjustment to the calculation methodology, in that the realized volatility is only calculated on each weekday where the two Parent Funds publish an NAV based on a “volatility basket” that is solely determined by the performance of the Parent Funds.
The Affected Index will be calculated on each weekday where the two Parent Funds will publish an NAV (using a stale NAV for the Side-Pocket Funds), but taking into account the performance of the two Parent Funds as well as the two Side-Pocket Funds.
These changes will be reflected in an updated index methodology for the Affected Index which will be made available on the Effective Date.
Defined terms used in this announcement, but not defined herein, have the meaning assigned to them in the respective index guideline of the Affected Index. The amended version of the index guideline will be available on the Effective Date.