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The constituents of the DJUBS Commodities Index 15.96% WTI crude oil 9.84% Wheat 8.94% Corn 7.14% Live cattle 6.49% Soybeans 6.27% Brent crude oil 6.13% Gold 5.03% Aluminium 4.86% Copper 3.98% Lean hogs 3.50% Sugar 3.35% Natural gas 2.44% Gas oil 2.30% Heating oil 2.05% Kansas wheat 2.03% RBOB gasoline 2.01% Cotton 1.76% Coffee 1.31% Feeder cattle 1.26% Nickel 1.18% Zinc 0.81% Cocoa 0.74% Lead 0.61% Silver
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The constituents of the DJUBS Commodities Index

Jan 12, 2016

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The constituents of the DJUBS Commodities Index. 15.96% WTI crude oil 9.84% Wheat 8.94% Corn 7.14% Live cattle 6.49% Soybeans 6.27% Brent crude oil 6.13% Gold 5.03% Aluminium 4.86% Copper 3.98% Lean hogs 3.50% Sugar 3.35% Natural gas. - PowerPoint PPT Presentation
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Page 1: The constituents of the DJUBS Commodities Index

The constituents of the DJUBS Commodities Index

15.96% WTI crude oil 9.84% Wheat 8.94% Corn 7.14% Live cattle 6.49% Soybeans 6.27% Brent crude oil 6.13% Gold 5.03% Aluminium 4.86% Copper 3.98% Lean hogs 3.50% Sugar 3.35% Natural gas

2.44% Gas oil2.30% Heating oil2.05% Kansas wheat2.03% RBOB gasoline2.01% Cotton1.76% Coffee1.31% Feeder cattle1.26% Nickel1.18% Zinc0.81% Cocoa0.74% Lead0.61% Silver

Page 2: The constituents of the DJUBS Commodities Index

Most investors choose to gain exposure to commodities through purchasing ETF’s. Most marketing material from product providers illustrate the

performance of their ETF by comparison to the underlying Commodity index not the commodity future itself.

Page 3: The constituents of the DJUBS Commodities Index

The following slides compare the performance of ETF’s relative to the continuation chart or the spot price of

the underlying

Note the performance of the spot price or near term contract in white relative to the performance of the ETF in green

Page 4: The constituents of the DJUBS Commodities Index

Oil WTI

Page 5: The constituents of the DJUBS Commodities Index

Wheat

Page 6: The constituents of the DJUBS Commodities Index

Corn

Page 7: The constituents of the DJUBS Commodities Index

Live Cattle

Page 8: The constituents of the DJUBS Commodities Index

Soybean

Page 9: The constituents of the DJUBS Commodities Index

Brent Oil

Page 10: The constituents of the DJUBS Commodities Index

Gold

Page 11: The constituents of the DJUBS Commodities Index

Aluminium

Page 12: The constituents of the DJUBS Commodities Index

Copper

Page 13: The constituents of the DJUBS Commodities Index

Lean Hogs

Page 14: The constituents of the DJUBS Commodities Index

Sugar

Page 15: The constituents of the DJUBS Commodities Index

Natural Gas

Page 16: The constituents of the DJUBS Commodities Index

Gas Oil (Heating Oil Europe)

Page 17: The constituents of the DJUBS Commodities Index

Heating Oil (US)

Page 18: The constituents of the DJUBS Commodities Index

Kansas Wheat

Page 19: The constituents of the DJUBS Commodities Index

RBOB Gasoline

Page 20: The constituents of the DJUBS Commodities Index

Cotton

Page 21: The constituents of the DJUBS Commodities Index

Coffee

Page 22: The constituents of the DJUBS Commodities Index

Feeder Cattle – no ETF

Page 23: The constituents of the DJUBS Commodities Index

Nickel

Page 24: The constituents of the DJUBS Commodities Index

Zinc

Page 25: The constituents of the DJUBS Commodities Index

Cocoa (ETF Leveraged)

Page 26: The constituents of the DJUBS Commodities Index

Lead (ETF Leveraged)

Page 27: The constituents of the DJUBS Commodities Index

Silver

Page 28: The constituents of the DJUBS Commodities Index

A remarkable number of ETF’s have underperformed the underlying commodity it purports to track

The marketing literature of most ETFs explain that the ETF will track the underlying commodity less

• Seasonal factors• Supply/ demand on the underlying commodity• Trading commissions• Fund manager charges

Page 29: The constituents of the DJUBS Commodities Index

What is the effect of supply and demand

• As an investor in an ETF there is little that can be done with regards to trading commissions and managers fees.

• However supply and demand and seasonal factors have an important impact on the price of commodities, both for the near-term contracts and contracts with a later date.

• The commodity curve (the future price) is said to be in Contango if the cost of a commodity in higher in the future than the price for near delivery

• If the future price is less than the present price then the commodity is said to be in backwardation. Backwardation can mean that demand is greater than near term supply.

Page 30: The constituents of the DJUBS Commodities Index

The effect of BackwardationSugar in Backwardation Feb 06

ETF performs well 06 to 07

Page 31: The constituents of the DJUBS Commodities Index

The effect of ContangoSugar in Contango Feb 2008 ETF underperforms 08 to 09

Page 32: The constituents of the DJUBS Commodities Index

Conclusion• Commodity Index ETF performance receives a considerable tailwind

from a futures curve in backwardation. • Therefore assessing the shape of the futures curve is virtually

essential to the decision making process in buying commodity index funds

• If the futures curve is in contango, consider a short ETF• If commodities move into another speculation driven advance, last

seen in 2008, we can expect the futures curve for a large number of commodities to move into backwardation.

• Important to have an exit strategy prepared for the next such broad based momentum run.

• Caution: There is the potential for legislation against such funds during the next big upside move in commodities where speculators will be accused of driving commodity prices higher.