In May 2006, Deutsche Bank launched a new set of commodity index products called the ''Deutsche Bank Liquid Commodities Indices Optimum Yield'', or ''DBLCI-OY. The DBLCI-OY indices are available for 24 commodities drawn from the energy, precious metals, industrial metals, agricultural and livestock sectors. A DBLCI-OY index based on the DBLCI benchmark weights is also available and the optimum yield technology has also been applied to the energy, precious metals, industrial metals and agricultural sector indices. Like the DBLCI, the DBLCI-OY is available in USD, EUR, GBP and JPY on a hedged and un-hedge basis. The DBLCI-OY is rebalanced on the fifth index business day of November when each commodity is adjusted to its base weight. The DBLCI-OY is also listed as an

exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...

(ETF) on the

American Stock Exchange NYSE American, formerly known as the American Stock Exchange (AMEX), and more recently as NYSE MKT, is an American stock exchange situated in New York City. AMEX was previously a mutual organization, owned by its members. Until 1953, it was known ...

Methodology

The rationale of the Optimum Yield technology was to address the dynamic nature of commodity forward curves. Unstable forward curves has meant the traditional approach employed by commodity indices, namely rolling futures contracts on a predefined scheduled (e.g. monthly) has, in our view, become an inferior strategy for passive commodity index investing. The DBLCI-OY indices are designed to select the futures contacts that either maximises the positive

roll yield The roll yield is the difference between the profit or loss of a futures contract and the change in the spot price of the underlying asset of that futures contract. Unlike fixed income or dividend yields, a roll yield does not provide a cash paymen ...

in backwardated term structures or minimises the negative roll yield in

contango Contango is a situation where the futures price (or forward price) of a commodity is higher than the ''expected'' spot price of the contract at maturity. In a contango situation, arbitrageurs or speculators are "willing to pay more owfor a comm ...

ed markets from the list of tradeable futures that expire in the next 13 months. The changing pattern in commodity term structures has important implications for commodity index investing. Historically the engine room of performance within a commodity index has derived from the positive roll return generated in the energy sector due to the tendency for forward curves in this part of the commodity complex to be downward sloping or backwardated. However, the appearance of

in the crude oil term structure over the past three years has meant the benefits of a positive roll return have disappeared and have been replaced by a negative roll return.

Characteristics

* Six commodities: WTI crude oil, heating oil, aluminium, gold, corn and wheat. * Index rolls to the futures contract that generates the maximum implied roll return from the list of tradable futures that expire in the next 14 months. * Commodity weights are re-balanced annually. * The DBLCI-OY is listed as an Exchange Traded Fund on the American Stock Exchange * Total and excess returns data are available from December 2, 1988.

Components and base weights

{, class="wikitable" , - ! ! Index Weight ! Contract Months ! Exchange , - , Energy , , , , - , WTI Crude Oil , 35.00% , Jan-Dec , NYMEX , - , Heating Oil , 20.00% , Jan-Dec , NYMEX , - , Precious Metals , , , , - , Gold , 10.00% , Dec , COMEX , - , Industrial Metals , , , , - , Aluminium , 12.50% , Dec , LME , - , Grains , , , , - , Corn , 11.25% , Dec , CBOT , - , Wheat , 11.25% , Dec , CBOT , -

Methodology

Characteristics

Components and base weights

See also