Source, LGIM’s multi-index commodity ETF to add Deutsche Bank commodities index

Mar 13th, 2013 | By | Category: Commodities

Source, a London-based provider of exchange-traded funds (ETFs), has announced that the Deutsche Bank Liquid Commodities Indices Optimum Yield Balanced Total Return (USD) Index (DBLCI OY Balanced) has met the criteria for inclusion in the LGIM Commodity Composite Index, the underlying index of the London-listed LGIM Commodity Composite Source ETF (LGCU). The change will come into effect on 20 March, 2013.

Source, LGIM’s multi-index commodity ETF to add Deutsche Bank commodity index

The LGIM Commodity Composite Index is an index of indices designed by Legal & General Investment Management to reflect the performance of a wide range of commodities.

The LGIM Commodity Composite Index, which was unveiled by Legal & General Investment Management (LGIM) in December 2011, is essentially an index of indices designed to represent the collective performance of a wide range of commodities.

The selection criteria for constituent indices include methodology, performance, liquidity and cost, with a view to ensuring that the LGIM Commodity Composite Source ETF offers high quality, diversified, cost-efficient exposure to commodities in a UCITS-compliant format.

The DBLCI OY Balanced is an optimised commodity index designed to offer broad commodity exposure while maximising the return from rolling commodity futures. Over the past five years, the index has outperformed the widely followed S&P GSCI TR by 7.6% per annum.

The index will join four existing constituent indices: the Barclays Commodity Index Pure Beta TR Index, the Citi CUBES Index, the JP Morgan Ex-Front Month Energy Light Index (TR) and the UBS Bloomberg Constant Maturity Commodity Index.

Combined, the five constituent indices provide exposure right across the commodities spectrum, encompassing oil and other energy commodities, agricultural and soft commodities, precious metals such as gold, and industrial metals. The constituent indices are reviewed at least annually to ensure that they capture developments in commodity indexation.

Ted Hood, Source CEO, said: “With the inclusion of the DBLCI OY Balanced, the LGIM Commodity Composite Index continues to offer ‘best of breed’ commodity exposure. Having an index manager of LGIM’s calibre monitoring the commodity index universe, performing due diligence and regularly reviewing its index selection is a major advantage for our ETF investors.”

Graeme Dewar, Director of LGIM Index Funds, added: “The growth of assets tracking the LGIM Commodity Composite Index is further proof of the increasing demand from pension funds and institutional investors for exposure to alternative investments. The inclusion of the DBLCI OY Balanced will provide investors with further diversified investment content.”

The index is replicated by the Source ETF via a swap-based approach, collateralised by physical investment in US Treasury Bills. So as to diversify counterparty risk, the ETF has multiple swap counterparties including Barclays Capital, Citigroup, JP Morgan, and UBS.

The fund trades on the London Stock Exchange in both GBP and USD and has assets of over $175 million. Its annual management and swap fees total 0.85%.

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