In the wake of fallen oil, lower commodity volatility, and increased regulation, many commodity desks and asset managers have been forced to shrink or close altogether.
The S&P Systematic Global Macro Index (S&P SGMI) is designed to offer a low-cost, liquid, and transparent solution by spreading risk evenly across the global futures markets with a long/short trend following rule to deliver results with little correlation to traditional markets.
A Dynamic Multi-Asset Strategy
In an effort to expand transparency and liquidity by measuring local markets, S&P Dow Jones Indices is partnering with B3 (formerly BM&FBOVESPA), the Brazilian exchange, to offer the Dow Jones/BM&F Commodity Index.
In the world of declining commodity prices following the global financial crisis, inverse indices became popular for market participants looking to profit from the negative returns.
To many market participants, it may seem like a “lost decade” for passive commodity indexing. After all, the most widely-recognized passive commodity index, the S&P GSCI (TR), lost about 10% annualized over the past 10 years. It is not the most impressive statistic, and what is worse is that the drop was not from a one-time crisis event. It was the result of an ongoing saga of dismal fundamental factors like slowing Chinese demand growth and an oversupply of oil from OPEC and U.S. producers, in conjunction with a range of unfavorable macro factors like a strong U.S. dollar, low interest rates, low inflation, and low growth. However, as with all crises, opportunities arise.
The following analysis shows how real assets may provide inflation protection and affect portfolio diversification in different markets around the world, including Australia, Brazil, Canada, China, the Eurozone, Japan, Mexico and South Korea.
The S&P Real Assets Index gives investors an innovative yet simple tool that may improve diversification and inflation protection while meeting the risk requirements of today.
Dig deeper into the economic effects and potential opportunities surrounding recent drops in oil.
The two flagship commodity indices, the S&P GSCI and the Dow Jones Commodity Index (DJCI), employ similar index construction methodologies, with weighting as the main difference between them.
This Practice Essentials paper focuses on understanding commodities as an asset class as well as the S&P GSCI® a preeminent measure of a basket of commonly traded commodities futures contracts.
S&P Practice Essentials Series is a curriculum based, educational program covering selected financial markets, asset classes and indexing concepts.