The Strategy is managed using an indexing investment approach, by which SSGA attempts to approximate, before expenses, the performance of the Index over the long term. In seeking to approximate the performance of the Index, SSGA expects to employ a sampling strategy where SSGA purchases a subset of the securities in the Index in an effort to create a portfolio of securities with generally the same risk and return characteristics of the Index. The actual number of holdings in the Portfolio will be based on a number of factors, including the size of the account in question. SSGA generally expects the number of securities in any account managed using the Strategy to be less (in some cases substantially less) than the number of securities comprising the Index. SSGA may use other techniques in attempting to track the performance of the Index, including the use of derivatives, such as options, futures contracts, and swap transactions. Because the Index holdings are reweighted periodically based on financial measures, the ability of the Strategy to track the Index performance will be highly dependent on SSGA's ability to implement, and to adjust, its portfolio sampling to match the Index's risk and return characteristics over time.
SSGA expects that it will typically seek to replicate index returns for the Portfolio through investments in the "cash" bond markets - actual holdings of debt securities and other instruments - rather than through "notional" or "synthetic" positions achieved through the use of derivatives, such as futures contracts or swap transactions (except in the case where SSGA believes that use of derivatives is necessary to achieve an exposure that is not readily available through the cash markets).
The Strategy's return may not match the return of the Index. In particular, because the Strategy will not typically own all of the securities comprising the Index at any given time, the success of the Strategy in tracking the Index return will depend to a large extent on the ability of SSGA to create a portfolio of securities and other instruments that will provide a return comparable to that of the Index.
Source: Bloomberg Barclays Indices. ©2020 Bloomberg Finance L.P. and its affiliates. Used with permission.
There are risks involved with investing, including possible loss of principal. You should refer to the Strategy's Disclosure Document (SDD) for a complete description of the risks of investing in the Strategy. Please contact SSGA's relationship management team for a copy of the SDD.