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S&P Dow Jones Indices has added two new sector indices to its flagship S&P GSCI commodity index family.
They are the S&P GSCI All Metals 3 Month Forward and the S&P GSCI All Metals 3 Month Forward Capped Component.
The indices are designed to measure the performance of precious and industrial metal commodity markets – including gold, silver, aluminium, copper, lead, nickel and zinc – while seeking to reduce negative roll yield in times of contango.
The indices use the first nearby contract expirations of the S&P GSCI − moved three months forward from the present date − and weight the metals in proportion to the weightings derived from the S&P GSCI methodology.
The capped component version applies S&P Dow Jones’s 35/20 methodology, a procedure designed to ensure that indices adhere to ESMA guidelines on UCITS issues. This in turn makes them suitable underlyings for exchange-traded funds (ETFs).
The capping procedure follows two rules, in succession. First, only one component can reach a maximum weight of 35%. Any excess weight is distributed proportionately among the remaining components. Second, no remaining component’s weight can exceed 20%. Any excess weight is distributed proportionately among the remaining components.
Jodie Gunzberg, Vice President at S&P Dow Jones Indices, said: “These indices provide global market participants with investible benchmarks across both the precious metal and industrial metal commodity markets. The indices combine the safe-haven characteristics of precious metals with the economically-sensitive characteristics of industrial metals.”
The indices’ parent, the S&P GSCI, is broad-based and weighted by production to represent the global commodity market beta. It is one of the most widely recognised commodity benchmarks.