Commodity ETF Tracking Yale Professors' Index of Raw-Material Mix Debuts
The United States Commodity Index Fund, an exchange-traded fund tied to an index designed in part by two Yale University professors whose research earlier this decade helped spur a commodities rush, begins trading today.
The index was created by SummerHaven Index Management LLC, based in Stamford, Connecticut, with the help of K. Geert Rouwenhorst, whose 2004 paper with colleague Gary Gorton, titled “Facts and Fantasies About Commodity Futures,” argued that an investment in a broad commodity index would have brought positive returns from 1959 to 2004. Both are professors of finance at the Yale School of Management.
The ETF is sponsored by U.S. Commodity Funds LLC, the Alameda, California manager of the nation’s largest exchange- traded funds in oil and natural gas. The fund is based on the SummerHaven Dynamic Commodity Index, a rotating mix of 14 commodity futures.
“We believe this approach may offer investor the better way to invest in commodities for the long run,” John Hyland, chief investment officer for U.S. Commodity Funds, said in an e- mail. “We think this will be of huge interest to sophisticated investors looking for commodity exposure.”
The SummerHaven Dynamic Commodity Index will pick monthly a mix of 14 commodities from a roster of 27, including futures for energy, precious and industrial metals, grains, livestock, and other agricultural commodities such as coffee and cotton.
The commodities will be equally weighted at 1/14, or 7.14 percent, of the index. The choice of commodities will be based on fundamental research and technical signals, the company said. At the end of the month, a new commodity mix will be determined.
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