Merrill raises the Mast for cross asset class exposure

Merrill Lynch has created Mast, a Multi Asset Strategy index based on investments across fixed income, currencies, commodities and equities. The asset classes are respectively represented in the index by Merrill’s 10-year US Treasury Futures Index (total return), the bank’s Foreign Exchange Arbitrage Index (total return) for currencies, the Merrilll eXtra Commodity 03 Index (total return) for commodities and the MSCI World Index (net total return) for equities. There is a semi-annual rebalancing of allocations in line with market conditions.

The index is offered in two forms, a basic non-leveraged and a two times leveraged version where allocations are determined by targeting twice the risk of Mast 1 with the return in line with that multiple, minus the costs of leverage.

Risks to Mast 1 and 2 include no capital protection and an exposure to the issuer’s credit risk. Mast 2 also includes the risk of borrowing, and the certificates may be terminated early if the index falls by 50% from its initial level. The strategies are calculated