Understanding the Nasdaq FC Index
The Nasdaq FC Index (Bloomberg ticker: BOFANFCC) is an innovative equity index developed by Bank of America (BofA) in collaboration with Nasdaq. Launched on January 29, 2020, it integrates BofA’s proprietary Fast Convergence (FC) technology to dynamically manage volatility and improve participation rates in index-linked products, such as fixed index annuities.
Key Features of the Nasdaq FC Index
- Volatility Targeting: Aims for a 12.5% annualized volatility by adjusting exposure to the Nasdaq-100 Total Return Index (XNDX) and cash equivalents.
- Dynamic Rebalancing: Utilizes FC technology to rebalance intraday, allowing the index to respond swiftly to market changes.
- Performance Cap: Implements a daily-rebalanced 4% monthly performance cap to enhance participation rates in linked products.
- Excess Return Index: Reflects returns above a risk-free rate, accounting for a 0.50% annual index fee.
Performance Overview
As of March 31, 2025, the Nasdaq FC Index has demonstrated the following annual returns:
- 2020: 19.43%
- 2021: 9.26%
- 2022: -21.49%
- 2023: 17.37%
- 2024: 4.60%
These figures illustrate the index’s ability to capture growth during bullish markets while aiming to mitigate losses during downturns.
Applications in Financial Products
The Nasdaq FC Index is commonly utilized in fixed index annuities, such as those offered by Athene. These products leverage the index’s dynamic volatility management to provide potential growth while aiming to protect against market volatility.
Comparison with Other Indices
When compared to other volatility-managed indices, the Nasdaq FC Index offers:
- Higher Volatility Target: 12.5% compared to others like the Shiller Barclays CAPE Allocator 6 Index at 6.00%.
- Enhanced Performance: Annualized returns of 6.74% over a 15-year period, outperforming some peers.
FAQ
1. What is the Nasdaq FC Index?
The Nasdaq FC Index is a volatility-managed equity index that uses Fast Convergence technology to dynamically adjust exposure to the Nasdaq-100 Total Return Index and cash, aiming for a 12.5% annualized volatility.
2. How does the Fast Convergence technology work?
It rebalances the index intraday based on market volatility, increasing exposure during stable periods and reducing it during volatile times to maintain the target volatility.
3. What is the significance of the 4% performance cap?
The cap limits monthly gains to 4%, which helps improve participation rates in index-linked products by providing more predictable returns.
4. Where can I track the Nasdaq FC Index performance?
Performance data is available on platforms like Bloomberg under the ticker BOFANFCC and on financial product providers’ websites.
5. Is the Nasdaq FC Index suitable for all investors?
It’s primarily designed for use in structured financial products like fixed index annuities, catering to investors seeking growth potential with volatility management.
In summary, the Nasdaq FC Index offers a sophisticated approach to volatility management, making it a valuable component in index-linked financial products aiming to balance growth and risk.
