S&P Dow Jones Indices Introduces Dow Jones Commodity Index; Index Based on Straightforward Design, Equal-Weighted Approach

Diversification & Liquidity Hallmarks of Dow Jones Commodity Index

Jul 01, 2014, 09:30 ET from S&P Dow Jones Indices

NEW YORK, July 1, 2014 /PRNewswire/ -- S&P Dow Jones Indices (SPDJI) has introduced today the Dow Jones Commodity Index which is designed to serve as a broad-market commodity index with diversification and liquidity as its intrinsic characteristics. The Index may be used as a well-diversified, core beta exposure, or as a simple building block for customizable indices or product creation. The Dow Jones Commodity Index will serve as a complement to the S&P GSCI® – the first investable commodity index and its family of indices.

"With today's announcement of the Dow Jones Commodity Index, market participants will have the advantage of using an index based upon a simple design that can serve as both a balanced, diversified, and liquid benchmark and as an underlying for potential investment products," says Jodie Gunzberg, Head of Commodities at S&P Dow Jones Indices.  "In speaking with market participants, it became apparent that there is a clear need for a commodity index that is highly liquid, avoids large sector weights, is transparent in its methodology, and is independently governed. The Dow Jones Commodity Index meets each of these criteria and fills an important gap in the marketplace."

The Dow Jones Commodity Index includes 23 of the commodities included in the broad, world production weighted S&P GSCI, but it weights each of the three major sectors - Energy, Metals, Agriculture and Livestock - equally. The Index's construction is meant to be simple in order to facilitate its use as an equally weighted beta, or to serve as a building block for modifications. The Dow Jones Commodity Index is rebalanced quarterly.

According to the methodology, only one commodity component within a sector can reach a maximum weight of 35%.  If there is any component above 35%, it is capped at 32% and any excess weight is distributed proportionately among the remaining components. No remaining component's weight can exceed 20%. If any remaining component's weight is above 20%, it is capped at 17% and the excess weight is distributed proportionately among the remaining components.

Commodities are weighted by relative liquidity based on the five year average total dollar value traded (TDVT), and include only those commodities that are included in the  methodology of the S&P GSCI®. Currently, Gasoil is excluded from the index due to the uncertainty around the contract at the time of index construction, though it may be reviewed for inclusion in the 2015 reconstitution. In the spirit of a simple, well-diversified and liquid first generation index, the roll and contract schedule follow that of the S&P GSCI®.

To learn more about the Dow Jones Commodity Index, please visit: www.spdji.com.

About S&P Dow Jones Indices
S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, is the world's largest, global resource for index-based concepts, data and research. Home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average, S&P Dow Jones Indices LLC has over 115 years of experience constructing innovative and transparent solutions that fulfill the needs of investors. More assets are invested in products based upon our indices than any other provider in the world. With over 1,000,000 indices covering a wide range of asset classes across the globe, S&P Dow Jones Indices LLC defines the way investors measure and trade the markets. To learn more about our company, please visit www.spdji.com.   

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