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Wednesday, Aug 21
New commodity ETF aims to mitigate contango effect
- Up and trading is the iShares DJ-UBS Roll Select Commodity Index Trust (CMDT), a commodity ETF aimed at negating the negative roll associated with owning futures contracts when markets are in contango.
- A market in contango has later-dated contracts more expensive than near-term ones, making the rolling over of expiring contracts a costly process. Markets in "backwardation" have later-dated contracts less expensive than near-term ones, and the roll can add to a fund's performance. CMDT selects those contracts exhibiting the least contango or most backwardation.
- One competing fund, USCI, has outperformed the DBC by 150 bps this year.
- Broad commodity ETFs: DJP, GSP, LSC, RJI, GSC, GCC, GSG, DBC, DPU, DJCI, UCI, USCI, DYY, UCD, DEE, CMD, DDP, RGRC, CTF, CFD CSCR, CSCB.