Deutsche Bank db x-trackers has recently listed 2 new “Optimum Yield” commodity booster ETFs on SGX.
The db x-trackers DB Commodity Booster Light Energy ETF and the db x-trackers DB Commodity Booster Dow Jones UBS Commodity ETF track indices which apply a rule based strategy called optimum yield (“OY”) when rolling the commodities futures underlying the index.
The OY mechanism seeks to maximise the roll benefits in backwardated markets and minimise losses from rolling in contangoed markets with the objective of outperforming the underlying S&P GSCI Light Energy Benchmark and DJ UBSCI Benchmark respectively.
Contango is a scenario where the price of futures in the forward market is higher than the spot price. A fund that keeps on rolling over commodity contracts into the forward market might severely underperform the actual price movement of the underlying commodity.
The Deutsche Bank Commodity Booster – S&P GSCITM Light Energy Euro Index is intended to reflect the performance of certain commodities. It comprises 24 commodities, representing the five broad commodity sectors, i.e. energy, precious metals, base metals, agriculture and livestock.
The DB Commodity Booster Dow Jones UBS Commodity (DJ-UBSCI) USD Index is intended to reflect the performance of 19 commodities based on the terms of their futures contracts. The Index represents five broad commodity sectors, i.e. energy, precious metals, base metals, agriculture and livestock.