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 2.62 percent in January, following a gain of 2.80 percent in calendar year 2012, according to data released today by Van Eck Global and Bloomberg.
Commodity prices rose during the month as the “fiscal cliff” impasse came to an end, the U.S. debt ceiling debate was extended until May, and the Federal Reserve allayed fears that its quantitative easing program would end. Commodities were also lifted by increased optimism in the U.S. and China, the latter of which saw year-over-year economic growth in the fourth quarter of 7.9 percent, a rate of expansion that pleased investors.
Energy was the best-performing commodity sector in January, while industrial metals moved into a positive uptrend, supported by the optimistic China data. Agriculture climbed due to bullish supply and demand data. Precious metals hovered near zero as investors digested positive economic data and mixed signals from the Fed. Livestock was the worst performing sub-sector of the month.
CMCITR roll yield was positive for the month. WTI contango and Brent backwardation both narrowed. Natural gas contango narrowed and continued to hover within manageable levels. Wheat contango narrowed and sugar moved into backwardation during the month. Copper and gold contango widened, while silver contango narrowed.
CMCITR outperformed the other main “constant maturity” indexes during the month, including the Continuous Commodity Index (CCITR: +2.22 percent) and the Greenhaven Continuous Commodity Index (GCC: +2.24 percent).
CMCITR also outperformed the more traditional Dow Jones UBS Commodity Index (DJUBSTR), which returned +2.40 percent, though CMCITR was outperformed by another more traditional index, the S&P Goldman Sachs Commodity Index (SPGSCITR), which returned +4.36 percent.
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.