DBLCI Optimum Yield (OY) Index
In May 2006, Deutsche Bank launched a new set of commodity index products called the Deutsche Bank Liquid Commodities Indices Optimum Yield, or DBLCI-OY. The DBLCI-OY indices are available for 24 commodities drawn from the energy, precious metals, industrial metals, agricultural and livestock sectors. A DBLCI-OY index based on the DBLCI benchmark weights is also available and the optimum yield technology has also been applied to the energy, precious metals, industrial metals and agricultural sector indices. Like the DBLCI, the DBLCI-OY is available in USD, EUR, GBP and JPY on a hedged and un-hedge basis. The DBLCI-OY is rebalanced on the fifth index business day of November when each commodity is adjusted to its base weight. The DBLCI-OY is also listed as an exchange-traded fund (ETF) on the American Stock Exchange.
The rationale of the Optimum Yield technology was to address the dynamic nature of commodity forward curves. Unstable forward curves has meant the traditional approach employed by commodity indices, namely rolling futures contracts on a predefined scheduled (e.g. monthly) has, in our view, become an inferior strategy for passive commodity index investing. The DBLCI-OY indices are designed to select the futures contacts that either maximises the positive roll yield in backwardated term structures or minimises the negative roll yield in contangoed markets from the list of tradeable futures that expire in the next 13 months.
The changing pattern in commodity term structures has important implications for commodity index investing. Historically the engine room of performance within a commodity index has derived from the positive roll return generated in the energy sector due to the tendency for forward curves in this part of the commodity complex to be downward sloping or backwardated. However, the appearance of contango in the crude oil term structure over the past three years has meant the benefits of a positive roll return have disappeared and have been replaced by a negative roll return.
Characteristics of the DBLCI-Optimum Yield
- Six commodities: WTI crude oil, heating oil, aluminium, gold, corn and wheat.
- Index rolls to the futures contract that generates the maximum implied roll return from the list of tradable futures that expire in the next 14 months.
- Commodity weights are re-balanced annually.
- The DBLCI-OY is listed as an Exchange Traded Fund on the American Stock Exchange
- Total and excess returns data are available from December 2, 1988.
Components and Base Weights
Index Weight Contract Months Exchange Energy WTI Crude Oil 35.00% Jan-Dec NYMEX Heating Oil 20.00% Jan-Dec NYMEX Precious Metals Gold 10.00% Dec COMEX Industrial Metals Aluminium 12.50% Dec LME Grains Corn 11.25% Dec CBOT Wheat 11.25% Dec CBOT
The DBLCI Family of Commodity Indices
- Deutsche Bank Liquid Commodity Index (DBLCI)
- DBLCI Mean Reversion (MR) Index
- DBLCI Optimum Yield (OY) Broad Index
- DBLCI Optimum Yield (OY) Balanced Index
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DBLCI Optimum Yield (OY) Balanced Index — The DBLCI OY Balanced has the same underlying 14 commodities as the DBLCI OY Broad, but, the energy sector weight is reduced from 55% of the broad index to 35%. The DBLCI OY Balanced is designed to be UCITS III compliant, that is the weight of no … Wikipedia
DBLCI Mean Reversion (MR) Index — The DBLCI Mean Reversion Index is a commodity index published by the Deutsche Bank. Launched at the same time as the Deutsche Bank Liquid Commodity Index (DBLCI) in February 2003, the DBLCI Mean Reversion has the same underlying assets. The… … Wikipedia
Deutsche Bank Liquid Commodity Index — The Deutsche Bank Liquid Commodity Index (DBLCI) was launched in February 2003. It tracks the performance of six commodities in the energy, precious metals, industrial metals and grain sectors. The DBLCI has constant weightings for each of the… … Wikipedia