The UBS Bloomberg Constant Maturity (“CM”) Commodity Total Return Index (ticker: CMCITR), a modern commodity index designed to reduce the potential negative effects of contango, returned 2.96 percent in August, bringing year-to-date (YTD) performance through the end of the month to 5.00 percent, according to data released today by Van Eck Global and Bloomberg.
Speculation surrounding the likelihood of “QE3,” a new round of economic stimulus from the Fed, was a major factor in driving commodity performance, particularly for silver and gold, which both saw price advances during the month. Oil prices were also lifted towards the end of August by falling U.S. inventories and the supply disruption caused by Hurricane Isaac.
Energy and precious metals were the best performing sectors during the month, while industrial metals and agriculture saw more muted gains as investors awaited greater clarity on the outlook for China’s economy and the next harvest. Livestock ended the month in negative territory.
CMCITR roll yield was negative for the month. WTI contango and Brent backwardation both narrowed. Natural gas contango widened significantly, and moved into severe levels. Sugar contango widened during the month, while wheat contango narrowed. Copper contango narrowed, gold contango widened and silver moved into backwardation.
CMCITR’s monthly performance again outpaced that of other “constant maturity” indexes, and remained ahead on a YTD basis. Competitors include the Continuous Commodity Index (CCITR: 2.37 percent in July; 0.20 percent YTD) and Greenhaven Continuous Commodity Index (GCC: 2.57 percent in July; 1.37 percent YTD).
During August, CMCITR also outperformed the more traditional Dow Jones UBS Commodity Index (DJUBSTR), which returned 1.30 percent (3.86 percent YTD), while it was outperformed by the S&P Goldman Sachs Commodity Index (SPGSCITR), which returned 6.36 percent (4.96 percent YTD).
CMCITR diversifies across 28 commodity components and up to five maturities. The Index was designed to minimize investment exposure to the front end of the futures curve; and by diversifying exposure across multiple maturities, the Index seeks to mitigate the impact of contango, a major concern for commodity investors.