New ETFs Target Commodity 'Contango'

Deutsche Bank (DB Quote) and PowerShares are launching seven new exchange-traded funds that track commodity prices.

The funds are based on versions of the Deutsche Bank Liquid Commodity Index subindices, which are designed to minimize the negative impact of contango, a condition in which the next-to-expire futures contract is trading at a lower price than contracts expiring in later months. This costs investors when they roll over their positions into the new contract upon the expiration of the old contract.

The indices also are designed to maximize the positive impact of backwardization, a condition in which the next-to-expire futures contract is trading at a higher price that contracts that expire in later months. ...