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Led by Dan Raab, Head of Indices and Managed Futures, ETFS Indices will design and publish new futures-based indices.
Raab, who joined ETF Securities in November last year, has more than 20 years’ experience in structuring commodity and financial derivative transactions, including roles at AIG, Credit Suisse and UBS, and played a key part in the creation of the widely followed Dow Jones-UBS Commodity Index.
According to Raab: “Commodity futures display unique characteristics unlike those seen in equities and bonds. Our new ETF Securities index unit develops strategies designed to take advantage of common commodity behaviour patterns, aiming to generate returns from long-short, spread, and long-only positions. We view this move into indices as a natural progression for our business in the US.”
The initial suite of indices launched by ETFS Indices includes four composite commodity strategy indices based on commodity futures prices. The strategies include two enhanced commodity long-only indices and two commodity long/short indices.
The indices are formulated with a goal of having low correlations to traditional asset classes while providing relatively strong reward vs. risk ratios. They are also designed to be liquid and replicable, and useful as tools for portfolio diversification.
The four debut indices are:
ETFS Indices Commodity Carry Strategy Long-Short Excess Return Index (Ticker: ETCCSLSE)
Structured to capitalize on the roll-yield differentials that exist at different points of a commodity futures curve. The goal of this approach is to extract alpha from the commodities markets in a “market-neutral” Index.
ETFS Indices Commodity Rotator Strategy Long-Short Excess Return Index (Ticker: ETCRSLSE)
Designed to provide a tool for extracting alpha from commodities in a market-neutral way. It incorporates several advanced concepts beyond a basic long-only approach used by traditional commodity benchmarks.
ETFS Indices Commodity Rotator Strategy Long-Only Excess Return Index (Ticker: ETCRSLOE)
Rotates among the available commodities and selects the ones that it deems most likely to provide the highest performance over the next holding period. The investment tenor in each selected commodity is optimized based on the expected carrying costs.
ETFS Indices Commodity Diversified Beta Long-Only Excess Return Index (Ticker: ETCDBLOE)
Designed to provide a high correlation to the Dow Jones-UBS Commodity Index, while targeting improved performance over time. Composed of commodity futures, the index is expected to have relatively low correlations to stock and bond markets, and positive correlations to inflation. The model uses several price based indicators to overweight and underweight the commodities relative to the benchmark.