S&P U.S. Retiree Spending Index - S&P Dow Jones Indices

[Pages:21]S&P U.S. Retiree Spending Index

Methodology

December 2021

S&P Dow Jones Indices: Index Methodology

Table of Contents

Introduction

3

Index Objective and Highlights

3

Index Family

3

Supporting Documents

4

Eligibility Criteria and Index Construction

6

S&P U.S. Retiree Spending Index

6

S&P U.S. Retiree Spending Composite Index

6

S&P U.S. Retiree Spending Equity Index

6

S&P U.S. Retiree Spending Bond Futures Index

6

S&P 500, MidCap 400, and SmallCap 600 Retiree Spending Indices

7

S&P 2-Year and 10-Year U.S. Treasury Note Futures Modified Total Return Indices 8

Index Maintenance

9

Rebalancing

9

Corporate Actions

9

Currency of Calculation and Additional Index Return Series

10

Base Date and History Availability

10

Index Data

11

Calculation Return Types

11

Index Governance

12

Index Committee

12

Index Policy

13

Holiday Schedule

13

Rebalancing

13

Unexpected Exchange Closures

13

Recalculation Policy

13

S&P U.S. Retiree Spending Bond Futures Index and S&P 2-Year and 10-Year U.S.

Treasury Note Futures Modified Total Return Indices

13

Contact Information

13

Index Dissemination

14

Tickers

14

Index Data

14

Web site

14

S&P Dow Jones Indices: S&P U.S. Retiree Spending Index Methodology

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Appendix I

15

Retiree Spending Sectors

15

Appendix II

17

Methodology Changes

17

Appendix III

18

EU Required ESG Disclosures

18

Disclaimer

19

S&P Dow Jones Indices: S&P U.S. Retiree Spending Index Methodology

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Introduction

Index Objective and Highlights

The S&P U.S. Retiree Spending Index is constructed by applying the Risk Control index framework to the S&P U.S. Retiree Spending Composite Index. The S&P U.S. Retiree Spending Composite Index is a weighted return index composed of equity and fixed income component indices. The component indices are the S&P U.S. Retiree Spending Equity Index and the S&P U.S. Retiree Spending Bond Futures Index.

The equity component index represents economic segments expected to be impacted by retiree spending. S&P Dow Jones Indices has established the Retiree Spending Sectors based on data gathered by the U.S. Department of Labor's Bureau of Labor Statistics . The Retiree Spending Sectors are formed by mapping Global Industry Classification Standard (GICS?) sub-industries to the Bureau of Labor Statistics' consumer expenditure items for persons aged 65 and over.1

For more information in the Retiree Spending Sectors please refer to Appendix I .

The f ixed income component index represents 2-year and 10-year tenors of the U.S. treasury market.

Index Family

S&P U.S. Retiree Spending Index. The index measures the performance of a strategy that applies the Risk Control method, as explained in the Index Mathematics Methodology and S&P Dow Jones Risk Control Indices Parameters2 documents, to the S&P U.S. Retiree Spending Composite Index.

S&P U.S. Retiree Spending Composite Index. The index is a weighted return index consisting of the S&P U.S. Retiree Spending Equity Index and the S&P U.S. Retiree Spending Bond Futures Index. The component indices are equally weighted within the index.

S&P U.S. Retiree Spending Equity Index. The index is a weighted return index consisting of the total return versions of the S&P 500 Retiree Spending Index, S&P MidCap 400 Retiree Spending Index, and S&P SmallCap 600 Retiree Spending Index, with sub-index weights of 40%, 40%, and 20%, respectively.

S&P 500, MidCap 400, and SmallCap 600 Retiree Spending Indices. Each index is comprised of companies from its universe index (the S&P 500, MidCap 400, and SmallCap 600, respectively) with the goal of overweighting those companies that may be positively impacted by retiree spending while reducing overall volatility as compared to the universe index.

S&P U.S. Retiree Spending Bond Futures Index. The index is a weighted return index consisting of modified total return versions (see details below) of the S&P 2-Year U.S. Treasury Note Futures index and S&P 10-Year U.S. Treasury Note Futures index, with sub-index weights of 50% and 50%, respectively.

S&P 2-Year and 10-Year U.S. Treasury Note Futures Modified Total Return Indices. The indices are modified versions of the S&P 2-Year and 10-Year U.S. Treasury Note Futures Total Return Indices. The indices follow all index construction and maintenance rules of the S&P 2-Year and 10-Year U.S. Treasury Note Futures Total Return Indices, except that they use SOFR overnight + 0.02963% instead of the 91day U.S. Treasury Bill rate as the risk-free rate.

1 Please refer to for further information on the Bureau of Labor Statistics' Table 3254, Consumer Expenditure Survey. 2 For information on the S&P Dow Jones Risk Control Indices Parameters document please refer to our website at .

S&P Dow Jones Indices: S&P U.S. Retiree Spending Index Methodology

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For more information on the S&P 2-Year and 10-Year U.S. Treasury Note Futures Total Return Indices, please refer to the S&P Global Bond Futures Index Series Methodology available at .

The f ollowing chart displays the steps of index construction.

S&P U.S. Retiree Spending Index

S&P U.S. Retiree Spending Composite Index

S&P U.S. Retiree Spending Equity Index (50%)

S&P U.S. Retiree Spending Bond Futures Index (50%)

S&P 500 Retiree Spending Index (TR) (40%)

S&P MidCap 400 Retiree Spending Index (TR) (40%)

S&P SmallCap 600 Retiree Spending Index (TR) (20%)

S&P 2-Year U.S. Treasury Note Futures Modified TR (50%)

S&P 10-Year U.S. Treasury Note Futures Modified TR (50%)

Please refer to Eligibility Criteria and Index Construction for further details.

Supporting Documents

This methodology is meant to be read in conjunction with supporting documents providing greater detail with respect to the policies, procedures and calculations described herein. References throughout the methodology direct the reader to the relevant supporting document for further information on a specific topic. The list of the main supplemental documents for this methodology and the hyperlinks to those documents is as follows:

Supporting Document S&P Dow Jones Indices' Equity Indices Policies & Practices Methodology S&P Dow Jones Indices' Fixed Income Policies & Practices Methodology S&P Dow Jones Indices' Index Mathematics Methodology S&P Dow Jones Indices' Fixed Income Index Mathematics Methodology S&P Dow Jones Indices' Global Industry Classif ication Standard (GICS) Methodology

URL Equity Indices Policies & Practices Fixed Income Policies & Practices Index Mathematics Methodology Index Mathematics Methodology GICS Methodology

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This methodology was created by S&P Dow Jones Indices to achieve the aforementioned objective of measuring the underlying interest of each index governed by this methodology document. Any changes to

or deviations from this methodology are made in the sole judgment and discretion of S&P Dow Jones Indices so that the index continues to achieve its objective.

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Eligibility Criteria and Index Construction

S&P U.S. Retiree Spending Index

A 5% risk control is overlaid on S&P U.S. Retiree Spending Composite Index to form the S&P U.S. Retiree Spending Index.

For the inputs necessary to calculate the risk control index, please refer to the S&P Dow Jones Risk Control Indices Parameters document available at .

For further information on the Risk Control Methodology, please refer to S&P Dow Jones Indices' Index Mathematics Methodology.

S&P U.S. Retiree Spending Composite Index The eligible underlying component indices used to create the index are detailed in the table below.

Index

Asset Class

Underlying Component Index

S&P U.S. Retiree

Eq ui ty

S&P U.S. Retiree Spending Equity Index

Spending Composite Index Fixed Income S&P U.S. Retiree Spending Bond Futures Index

Index Weight 50% 50%

The index is constructed by assigning the weights as detailed in the table above to the underlying component indices at each quarterly rebalancing.

The index is calculated by means of the weighted return method. For calculation details, refer to S&P Dow Jones Indices' Index Mathematics Methodology.

S&P U.S. Retiree Spending Equity Index The eligible underlying component indices used to create the index are detailed in the table below.

Index

S&P U.S. Retiree Spending Equity Index

Asset Class Eq ui ty

Underlying Component Index S&P 500 Retiree Spending Index (TR) S&P MidCap 400 Retiree Spending Index (TR) S&P SmallCap 600 Retiree Spending Index (TR)

Index Weight 40% 40% 20%

The index is constructed by assigning the weights as detailed in the table above to the underlying component indices at each quarterly rebalancing.

The daily index levels are calculated in the same manner as the S&P U.S. Retiree Spending Composite Index as previously detailed.

S&P U.S. Retiree Spending Bond Futures Index

The eligible asset classes and the component indices used to create the index are detailed in the table below.

Index

S&P U.S. Retiree Spending Bond Futures In d ex

Asset Class Fixed Income

Underlying Component Index S&P 2-Year U.S. Treasury Note Futures Modified TR S&P 10-Year U.S. Treasury Note Futures Modified TR

Index Weight 50% 50%

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The index is constructed by assigning the weights as detailed in the table above to the underlying component indices at each quarterly rebalancing.

The daily index levels are calculated in the same manner as the S&P U.S. Retiree Spending Composite Index as previously detailed.

S&P 500, MidCap 400, and SmallCap 600 Retiree Spending Indices

The methodology for the S&P 500, MidCap 400, and SmallCap 600 Retiree Spending Indices employs a non-market-cap-weighting scheme, using the divisor methodology used in all of S&P Dow Jones' equity indices.

Constituents for the indices are drawn from the S&P 500, S&P MidCap 400, and S&P SmallCap 600,

respectively. Some companies in the universe indices may have more than one class of common stock outstanding. In the S&P 500, MidCap 400, and SmallCap 600 Retiree Spending Indices, all publicly listed multiple share class lines are eligible for index inclusion, subject to meeting the eligibility criteria. For more

inf ormation regarding the treatment of multiple share classes, please refer to Approach A within the Multiple Share Classes section of the S&P Dow Jones Indices' Equity Indices Policies & Practices document.

The constituent selection process uses an optimizer to select constituents with the goal of overweighting

those companies expected to be impacted by retiree spending while reducing overall volatility as compared to the underlying universe indices. The indices employ an optimization driven-weighting scheme using the most recent month end release of the Northfield U.S. Fundamental Risk Model. At each

rebalancing, the weight of each constituent is set such that the overall estimated volatility of the index is minimized. The estimation is based on historical covariance of U.S. stock returns from the last 60 monthly observations, subject to the stock level and sector level constraints.

The optimization settings are shown in the table below.

Un i v ers e Op ti mi zati o n Tool

Objective

Maximum Stock Weight

Sec to r Al l o c ati o n

S&P 500 Retiree Spending S&P MidCap 400 Retiree S&P SmallCap 600 Retiree

Index

Spending Index

Spending Index

S&P 500

S&P MidCap 400

S&P SmallCap 600

Northfield U.S. Fundamental Risk Model. The optimization process builds covariance and

correlation matrices to select index constituents and determine their weights.

To achieve a lower overall volatility than the underlying universe index, while maintaining risk

exposure characteristics.

The lower of 20 times its weight in the underlying universe index or 2%.

Companies from the Retiree Spending Sectors are assigned 80% of the weight in the index at rebalancing with the remaining 20% assigned to companies from sub-industries other than the Retiree Spending Sectors. See Appendix I for more information on the Retiree Spending Sec to rs .

For more information on the risk model, please visit .

S&P Dow Jones Indices calculates daily return series using both gross and net cash dividends reinvested. Net return reinvested is reflective of the return to an investor where dividends are reinvested af ter the deduction of withholding tax. The tax rate ap plied is the rate to non-resident institutions that do

not benefit from double taxation treaties.

For more information on the tax rates used in the calculation of net return indices, please refer to S&P Dow Jones Indices' Equity Indices Policies & Practices Methodology.

Please refer to S&P Dow Jones Indices' Index Mathematics Methodology for more information on total return calculations.

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