ETF Securities (ETFS) has listed a fund tracking commodity three month forward contracts on the London Stock Exchange.
The ETFX DJ-UBS All Commodities Forward 3 Month fund invests in a basket of 19 forward commodity futures, represented in the DJ-UBSCI F3 index. This benchmark provides exposure to futures contracts three months ahead on the DJ-UBSCI index.
ETFS says the F3 index is weighted two-thirds to liquidity and one third to production.
The firm says this index has historically exhibited high correlation with spot returns, while reducing the impact of roll yield, as the shape of the futures curve can vary and therefore impact upon returns.
For example, the short end of the yield curve tends to be more strongly affected by contango, where the price of the future is higher than the spot price, or backwardation, which is the reverse situation.
On the other hand, ETFS says longer dated futures are less affected by these factors and are typically driven more by long term structural supply, demand and cost issues, which tend to alter more slowly.
Dow Jones Indexes president Michael Petronella says: "As commodities investing has become more and more popular and diversified in the past years, market participants increasingly seek innovative indexing tools."
He adds: "The Dow Jones-UBS Commodity Forward Indexes provide superior and reliable performance measurement of longer-dated commodities futures contracts."
The latest fund is part of the firm's ETF Exchange (ETFX), which comprises a range of swap counterparties. These include Bank of America Merrill Lynch, Barclays Capital, Citi and Rabobank International.
