Product details

BEA's enhanced index fund product uses derivatives and cash market securities to find the most efficient way to "track an index." The considerations involve transaction costs, custodial fees, witholding taxes on dividends, and fees from securities lending. In the case, BEA is faced with the task of investing an off-shore portfolio so as to track the S&P 500. The choices include buying the underlying stocks, buying an S&P 500-index-linked note, buying futures or doing an S&P 500 swap and investing in a variety of short-term fixed-income alternatives.