seeks positive total returns. They did not specify a trading symbol or expense ratio in the initial filing.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by using a quantitative, rules-based strategy that is designed to provide returns that correspond to the performance of the [ ] (the “Benchmark”). The Fund, in accordance with its strategy allocation rules, will invest in a combination of equity securities of companies in emerging market countries, exchange-listed futures contracts on the MSCI Emerging Markets Index, and exchange-listed futures contracts on the CBOE Emerging Markets ETF Volatility Index (“Emerging Markets VIX Index”). The Fund also will invest in U.S. Government securities, money market instruments (including repurchase agreements), structured notes, cash and cash equivalents to collateralize its derivative investments or for other purposes.
The Benchmark’s allocation to futures contracts on the Emerging Markets VIX Index is designed to serve as an implied volatility hedge against exposure to emerging market equity securities, as volatility historically tends to correlate negatively to the performance of the equity markets (i.e., rapid declines in the performance of the equity markets generally are associated with particularly high volatility in such markets). “Implied volatility” is a measure of the expected volatility of the MSCI Emerging Markets Index, which is a free float-adjusted market capitalization index measuring the performance of equity securities of companies in more than 20 emerging market countries. The Emerging Markets VIX Index measures the 30-day forward volatility of the MSCI Emerging Markets Index as calculated based on the prices of certain put and call options on that index. The Emerging Markets VIX Index is a theoretical calculation and cannot be traded.
During periods of increased volatility, a greater portion of the Fund’s assets will be invested in futures on the Emerging Markets VIX Index. However, during periods of lower volatility, a greater portion of the Fund’s assets will be invested in equity investments, which include emerging market equity securities. During periods of lower volatility, the Fund also will invest in futures contracts on the MSCI Emerging Markets Index. Although the Fund seeks returns comparable to the returns of the Benchmark, the Fund can have a higher or lower exposure to any component within the Benchmark at any time.
[The Fund seeks to gain exposure to futures contracts on the Emerging Markets VIX Index by investing in a subsidiary organized in the Cayman Islands (the “Subsidiary”). The Subsidiary would be wholly-owned and controlled by the Fund. Should the Fund invest in the Subsidiary, it would be expected to provide the Fund with exposure to investment returns from futures contracts on the Emerging Markets VIX Index within the limits of the federal tax requirements applicable to investment companies, such as the Fund. Unlike the Fund, the Subsidiary may invest without limitation in futures contracts on the Emerging Markets VIX Index and may use leveraged investment techniques. The Subsidiary would otherwise be subject to the same general investment policies and restrictions as the Fund. Except as noted, references to the investment strategies of the Fund for non-equity investments include the investment strategies of the Subsidiary.]
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