– The S&P GSCI gained 8.49% on the month for a Q3 gain of 8.27%.
– The S&P GSCI Agriculture Index was the star performer during the third quarter, advancing 31.26% for a YTD gain of 7.38%. The Ags were led by strength in wheat and cotton, which were bolstered by adverse weather conditions in Russia and Pakistan.
– The S&P GSCI Energy Index increased 8.92% in Q3, which lessened its YTD decline to 8.70%.
– Year-to-date (YTD), the S&P GSCI ended Q3 with a loss of 3.87%, dragged lower by weakness in the Energy sector which has been under pressure due to slack OECD demand and abundant U.S. petroleum inventories…..
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S&P GSCI® Index
September Total Return: +8.49% (-3.87% YTD, +8.27% Q3) (All returns are total returns unless otherwise noted)
September Was a Good Quarter
The S&P GSCI enjoyed a good quarter’s worth of gains in September, advancing 8.49% on the month for a Q3 gain of 8.27%. Index strength was broad-based, led by Agriculture and the Metals. While adverse weather conditions and strong global demand boosted the Ags, anticipation of additional quantitative easing pressured the U.S. Dollar and supported U.S. Dollar-based assets, notably the Metals. Accompanying September’s S&P GSCI strength was a 5.26% decline in the U.S. Dollar index and an 8.92% increase in the S&P 500. Year-to-date (YTD), the S&P GSCI ended Q3 with a loss of 3.87%, dragged lower by weakness in the Energy sector, which has been under pressure due to slack OECD demand and abundant U.S. petroleum inventories. The S&P GSCI Energy Index increased 8.92% in Q3, which lessened its YTD decline to 8.70%. In Q3, the S&P GSCI Industrial Metals Index reversed all of its first half weakness with a 21.01% gain, overtaking the S&P GSCI Precious Metals Q3 gain of 6.03%. Indicating excessive fright for the precious metals rather than the economic might often reflected by the industrial metals, the S&P GSCI Industrial Metals Index ended Q3 with a YTD gain of only 3.74%, which was well behind the S&P GSCI Precious Metals YTD increase of 19.80%. The S&P GSCI Agriculture Index was the Q3 stud, advancing 31.26% for a YTD gain of 7.38%, led by strength in wheat and cotton, which were bolstered by adverse weather conditions in Russia and Pakistan, and strong global demand. Enhanced and forward strategies lagged a bit in September, as they normally do in sharp underlying index rallies. Generally, these strategies fared better for the quarter and YTD, as measured by the S&P GSCI Enhanced Index YTD decline of 1.09% and the S&P GSCI 3-Month Forward YTD decline of 0.98% at the end of Q3.
September Total Return: +8.49% (-3.87% YTD, +8.27% Q3) (All returns are total returns unless otherwise noted)
September Was a Good Quarter
The S&P GSCI enjoyed a good quarter’s worth of gains in September, advancing 8.49% on the month for a Q3 gain of 8.27%. Index strength was broad-based, led by Agriculture and the Metals. While adverse weather conditions and strong global demand boosted the Ags, anticipation of additional quantitative easing pressured the U.S. Dollar and supported U.S. Dollar-based assets, notably the Metals. Accompanying September’s S&P GSCI strength was a 5.26% decline in the U.S. Dollar index and an 8.92% increase in the S&P 500. Year-to-date (YTD), the S&P GSCI ended Q3 with a loss of 3.87%, dragged lower by weakness in the Energy sector, which has been under pressure due to slack OECD demand and abundant U.S. petroleum inventories. The S&P GSCI Energy Index increased 8.92% in Q3, which lessened its YTD decline to 8.70%. In Q3, the S&P GSCI Industrial Metals Index reversed all of its first half weakness with a 21.01% gain, overtaking the S&P GSCI Precious Metals Q3 gain of 6.03%. Indicating excessive fright for the precious metals rather than the economic might often reflected by the industrial metals, the S&P GSCI Industrial Metals Index ended Q3 with a YTD gain of only 3.74%, which was well behind the S&P GSCI Precious Metals YTD increase of 19.80%. The S&P GSCI Agriculture Index was the Q3 stud, advancing 31.26% for a YTD gain of 7.38%, led by strength in wheat and cotton, which were bolstered by adverse weather conditions in Russia and Pakistan, and strong global demand. Enhanced and forward strategies lagged a bit in September, as they normally do in sharp underlying index rallies. Generally, these strategies fared better for the quarter and YTD, as measured by the S&P GSCI Enhanced Index YTD decline of 1.09% and the S&P GSCI 3-Month Forward YTD decline of 0.98% at the end of Q3.
S&P GSCI Energy Index
September Total Return: +8.92% (-8.70% YTD, +3.03% Q3, 67.44% Weight)
Slack OECD Demand and High Inventories
Emerging markets continue to expand and demand more energy. However, it has not been enough to offset the U.S. centric demand contraction which has allowed U.S. petroleum inventories to build to the highest levels in over 20 years. Bulging inventories showed signs of declining late in September, contributing to the 8.92% monthly gain in the S&P GSCI Energy Index as output from OPEC fell to an eight-month low. Year-to-date, the spot S&P GSCI Energy Index ended September with a slight increase of 0.46% compared to the 8.70% loss for the S&P GSCI Energy Index TR (see chart on page 3). Negative roll return in the Energy sector has been the bane of many commodity investors’ existence since mid-2008 as global economies have experienced the worst contraction since WW II. Generally in times of solid demand, commodity futures curves are more likely to experience backwardation conditions (where further out futures trade at lower prices), which will have a tendency to enhance total returns. When there is slack demand and ample supplies, contango conditions will often result (where further out futures trade at higher prices), reducing total returns. Index roll returns are often directly related to index commodity supply and demand cycles. The chart below depicts the 12-month S&P GSCI roll return (determined by the 12-month excess return minus the 12-month spot return) overlaid with the 12-month total return. Since December of 1970, the average of the 12-month roll return has been a positive 0.06%. The more recent (since 2008) plunge in the roll return has been accompanied by the greatest 12-month plunge in total returns in S&P GSCI history and the worst U.S. recession since 1930.
S&P GSCI Industrial Metals Index
September Total Return: +10.04% (+3.74% YTD, +21.01% Q3, 8.54% Weight)
QE II and New ETFs Support the Metals
The S&P GSCI Industrial Metals Index leaped 10.04% in September and 21.01% in Q3, supported by the anticipation of additional quantitative easing (QE II) from the U.S. Federal Reserve and the advent of a series of new physically-backed ETFs based on the industrial metals. Some of the usual suspects, such as declining LME inventories and demand from Asia, were also cited as bullish factors in Q3 by many analysts. However, the history of ETF products based on the precious metals shows that these investment vehicles, which physically take supply off the market allowing retail investors direct exposure to the metals market, can have very bullish implications for the underlying commodities. Some market skeptics point out that ETFs based on the base metals may also provide a convenient way for over-stocked metal suppliers to lay off excess inventory. For the quarter, the S&P GSCI Lead Index was the best performer, with a 28.80% Q3 increase, which lessened its YTD decline to 9.50%. Year-to-date, nickel as been the best performing industrial metal as measured by the S&P GSCI Nickel Index September-end YTD gain of 25.44% on the back of a 18.46% gain in Q3, 13.15% of the gain coming in September. Anticipation of increasing stainless steel-related demand and the possibility of a nickel ETF being released before the end of 2010 contributed to nickel strength in Q3. Copper is the most significant industrial metal in the S&P GSCI and the S&P GSCI Copper Index rallied 22.94% in Q3 for a YTD gain of 7.74%. Nickel and copper were also the only two industrial metals that had backwarded curve structures at the end of September. The one-year-out October 2011 nickel futures contract settled the month 1.85% below the front October 2010 contract and the October 2011 copper future settled 0.67% below the front October 2010 contract. A year ago, at the end of September 2009, both measures of these respective futures curves were flat. An old saying among commodity traders is, «Never short a backwarded market.»
Industrial Metals, Not Just About U.S. IP
The chart on the following page depicts the S&P GSCI Industrial Metals Spot Index closing September at a new post 2008/09 correction high. Overlaid against the S&P GSCI Industrial Metals Spot Index is U.S. Industrial Production from a base of 100, to match the inception of the S&P GSCI Industrial Metals Spot Index in December 1976. The chart indicates the substantial extension, beginning in 2005, of the S&P GSCI Industrial Metals Spot Index beyond its traditional, somewhat parallel relationship with U.S. Industrial Production. Is it too expensive or a clear indication of the migration of global GDP, away from the U.S.?
September Total Return: +10.04% (+3.74% YTD, +21.01% Q3, 8.54% Weight)
QE II and New ETFs Support the Metals
The S&P GSCI Industrial Metals Index leaped 10.04% in September and 21.01% in Q3, supported by the anticipation of additional quantitative easing (QE II) from the U.S. Federal Reserve and the advent of a series of new physically-backed ETFs based on the industrial metals. Some of the usual suspects, such as declining LME inventories and demand from Asia, were also cited as bullish factors in Q3 by many analysts. However, the history of ETF products based on the precious metals shows that these investment vehicles, which physically take supply off the market allowing retail investors direct exposure to the metals market, can have very bullish implications for the underlying commodities. Some market skeptics point out that ETFs based on the base metals may also provide a convenient way for over-stocked metal suppliers to lay off excess inventory. For the quarter, the S&P GSCI Lead Index was the best performer, with a 28.80% Q3 increase, which lessened its YTD decline to 9.50%. Year-to-date, nickel as been the best performing industrial metal as measured by the S&P GSCI Nickel Index September-end YTD gain of 25.44% on the back of a 18.46% gain in Q3, 13.15% of the gain coming in September. Anticipation of increasing stainless steel-related demand and the possibility of a nickel ETF being released before the end of 2010 contributed to nickel strength in Q3. Copper is the most significant industrial metal in the S&P GSCI and the S&P GSCI Copper Index rallied 22.94% in Q3 for a YTD gain of 7.74%. Nickel and copper were also the only two industrial metals that had backwarded curve structures at the end of September. The one-year-out October 2011 nickel futures contract settled the month 1.85% below the front October 2010 contract and the October 2011 copper future settled 0.67% below the front October 2010 contract. A year ago, at the end of September 2009, both measures of these respective futures curves were flat. An old saying among commodity traders is, «Never short a backwarded market.»
Industrial Metals, Not Just About U.S. IP
The chart on the following page depicts the S&P GSCI Industrial Metals Spot Index closing September at a new post 2008/09 correction high. Overlaid against the S&P GSCI Industrial Metals Spot Index is U.S. Industrial Production from a base of 100, to match the inception of the S&P GSCI Industrial Metals Spot Index in December 1976. The chart indicates the substantial extension, beginning in 2005, of the S&P GSCI Industrial Metals Spot Index beyond its traditional, somewhat parallel relationship with U.S. Industrial Production. Is it too expensive or a clear indication of the migration of global GDP, away from the U.S.?
S&P GSCI Precious Metals Index
September Total Return: +5.58% (+19.80% YTD, +6.03% Q3, 3.53% Weight)
Gold Who? Silver Stars
The S&P GSCI Silver Index jumped 16.33% in Q3, gaining 28.56% YTD and becoming 2010’s best performing metal. The silver versus gold relationship seems similar to Canada’s relationship with the United States. Silver often takes a backseat to gold in terms of market attention and recognition, yet has offered stellar performance. The chart on the following page depicts the solid outperformance of the S&P GSCI Silver Index over the past few years compared to that of the S&P GSCI All Metals Index. Until about September of 2007, the performance of the S&P GSCI Silver Index closely tracked that of the S&P GSCI All Metals Index. Since the end of September 2007, the S&P GSCI Silver Index has increased 51.14% compared to an increase of only 0.88% for the S&P GSCI All Metals Index. What is the significance of September 2007? September 18, 2007 marked the first FOMC ease of this cycle, from 5.25% to 4.75%. For comparison, since the end of September 2007, the S&P 500 has declined 19.98% and the U.S. Dollar Index has increased 1.33%.
Fright Still Ahead of Might
At the end of September, the S&P GSCI Gold Index had an S&P GSCI weight of 3.12% compared to 0.41% for silver, meaning that gold was roughly 7.6 times more significant in the S&P GSCI than silver. Returning to the silver/gold, Canada/U.S. analogy, the U.S. economy is roughly ten times that of Canada, or at least it used to be. Flight to safety, persistently declining U.S. interest rates accelerated by U.S. Federal Reserve purchasing of U.S Treasuries, and just plain market momentum settled the front gold future at its highest month-end close ever, US$ 1,307.8/oz in September. Year-to-date, the S&P GSCI Gold Index ended Q3 with a gain of 18.75% compared 7.74% for the S&P GSCI Copper Index, indicating that although copper and the industrial metals played some catch-up in Q3, flight to safety into gold was still beating industrial might as represented by copper.
S&P GSCI Agriculture Index
September Total Return: +9.04% (+7.38% YTD, +31.26% Q3, 15.86% Weight)
It’s Not Just the Weather
The S&P GSCI Agriculture Index increased 31.26% in Q3 and was the leading major sector index performer. As a group, the softs group bested the overall Ag sector gain as measured by the S&P GSCI Softs Index Q3 increase of 32.62%. Sugar was the softs stud, as measured by the S&P GSCI Sugar Index Q3 gain of 52.12%, but for the Ags, it is really about the grains, most notably wheat. Wheat in 2010 has been affected mostly by the drought in Russia, but conditions have improved to allow plenty of winter wheat planting. Certainly, with a myriad of wheat price headlines to inspire fear, there should be plenty of winter wheat drilled globally this fall. Year-to-date, the higher protein based S&P GSCI Kansas Wheat Index ended September with a gain of 20.54% on the back of a 39.78% Q3 gain. What might be more significant in 2010 is the volatility. Despite a Q3 gain of 34.47% in the much greater index weighted S&P GSCI (Chicago) Wheat Index, the index ended September with a YTD gain of only 8.49%. The U.S.-based grain pressure present in early 2010, which resulted from ample supplies and large crop estimates, has been alleviated by a bit of adverse international weather, but also in part by plenty of global demand. However, the adverse weather has not been in the U.S., the world’s largest grain exporter. This writer, who owns a farm in Indiana, did the annual Midwest U.S.»corn-n-beans» belt inspection tour and in August, conditions looked downright perfect. A key question should be, «Is the U.S. grain belt overdue for some adverse weather in the next few years?»
Backwardation and Ethanol = Returns Boost
Death and taxes are things we can all count on in life and more recently, the migration towards all things «green» has joined their ranks. Along with the recent appreciation of the price of corn, ethanol futures have also recovered over one third from the summer lows (see chart on the following page). The possibility that the gasoline/ethanol blend will change from E-10 to E-15 (10% to 15%) has helped to provide a boost to the U.S.’s biggest crop, corn, valued near US$ 48 billion in 2009 (according to Bloomberg news). About one third of the current corn crop is used to produce ethanol. Solid demand, despite the likelihood of a near record crop, has helped to produce a backwarded futures curve structure. At the end of Q3, the December 2011 corn future settled at a 2.92% discount to the current December 2010 contract. A year ago at the end of September, the one-year-out December corn future traded at a 14.46% premium to the front December future. Beans are also backwarded, but a bit less so than a year ago, while wheat futures have garnered plenty of headlines. However, the futures market is showing little sign of current tight supplies with a contango shaped curve of over 9% from the front Dec. 2010 future to the Dec. 2011 future. Often in sync with the supply and demand cycle of markets, the index rolling process in futures often boosts returns in times of tight supplies (backwardation) and hampers returns in times of ample supplies (contango).
September Total Return: +9.04% (+7.38% YTD, +31.26% Q3, 15.86% Weight)
It’s Not Just the Weather
The S&P GSCI Agriculture Index increased 31.26% in Q3 and was the leading major sector index performer. As a group, the softs group bested the overall Ag sector gain as measured by the S&P GSCI Softs Index Q3 increase of 32.62%. Sugar was the softs stud, as measured by the S&P GSCI Sugar Index Q3 gain of 52.12%, but for the Ags, it is really about the grains, most notably wheat. Wheat in 2010 has been affected mostly by the drought in Russia, but conditions have improved to allow plenty of winter wheat planting. Certainly, with a myriad of wheat price headlines to inspire fear, there should be plenty of winter wheat drilled globally this fall. Year-to-date, the higher protein based S&P GSCI Kansas Wheat Index ended September with a gain of 20.54% on the back of a 39.78% Q3 gain. What might be more significant in 2010 is the volatility. Despite a Q3 gain of 34.47% in the much greater index weighted S&P GSCI (Chicago) Wheat Index, the index ended September with a YTD gain of only 8.49%. The U.S.-based grain pressure present in early 2010, which resulted from ample supplies and large crop estimates, has been alleviated by a bit of adverse international weather, but also in part by plenty of global demand. However, the adverse weather has not been in the U.S., the world’s largest grain exporter. This writer, who owns a farm in Indiana, did the annual Midwest U.S.»corn-n-beans» belt inspection tour and in August, conditions looked downright perfect. A key question should be, «Is the U.S. grain belt overdue for some adverse weather in the next few years?»
Backwardation and Ethanol = Returns Boost
Death and taxes are things we can all count on in life and more recently, the migration towards all things «green» has joined their ranks. Along with the recent appreciation of the price of corn, ethanol futures have also recovered over one third from the summer lows (see chart on the following page). The possibility that the gasoline/ethanol blend will change from E-10 to E-15 (10% to 15%) has helped to provide a boost to the U.S.’s biggest crop, corn, valued near US$ 48 billion in 2009 (according to Bloomberg news). About one third of the current corn crop is used to produce ethanol. Solid demand, despite the likelihood of a near record crop, has helped to produce a backwarded futures curve structure. At the end of Q3, the December 2011 corn future settled at a 2.92% discount to the current December 2010 contract. A year ago at the end of September, the one-year-out December corn future traded at a 14.46% premium to the front December future. Beans are also backwarded, but a bit less so than a year ago, while wheat futures have garnered plenty of headlines. However, the futures market is showing little sign of current tight supplies with a contango shaped curve of over 9% from the front Dec. 2010 future to the Dec. 2011 future. Often in sync with the supply and demand cycle of markets, the index rolling process in futures often boosts returns in times of tight supplies (backwardation) and hampers returns in times of ample supplies (contango).
S&P GSCI Softs Index
September Total Return: 16.41% (+5.81% YTD, +32.62% Q3, 5.03% Weight)
Backwardation and Sugar
The S&P GSCI Softs Index jumped 32.62% in Q3 on the back of a 16.41% gain in September, for a YTD increase of 5.81%. Volatility remains a key factor in the softs, as exemplified by the most significant soft constituent, sugar. The S&P GSCI Sugar Index increased 86.26% in 2009 and gained 52.12% in Q3 2010, but still ended the third quarter with a YTD loss of 9.41%. Another key factor in the S&P GSCI softs is the fact that cocoa was the only soft commodity that was not in backwardation at the end of September. The chart on page 3 indicates that at the end of September, the S&P GSCI Softs Index TR was in excess of the spot increase (+5.81% versus +4.42%). The majority of the softs are experiencing supply constraint issues, which is boosting front futures prices and tipping the futures curve into backwardation, providing an extra total return boost when rolling futures contracts. At the end of September, the October 2011 sugar future closed at an extreme 25.6% discount to the front October 2010 contract, indicating currently tight supplies, along with anticipation of alleviating the supply/demand situation in the future. Year-to-date, the S&P GSCI Cotton Index was the best performing single commodity index at the end of September, with a gain of 34.72%. Helping to boast total returns was the contango shaped curve, with a discount of 14% for the Oct. 2011 cotton contract compared to the front Oct. 2010 future. Adverse weather in some of the main growing countries, notably Pakistan, along with increasing global demand, has been cited for cotton strength in 2010.
September Total Return: 16.41% (+5.81% YTD, +32.62% Q3, 5.03% Weight)
Backwardation and Sugar
The S&P GSCI Softs Index jumped 32.62% in Q3 on the back of a 16.41% gain in September, for a YTD increase of 5.81%. Volatility remains a key factor in the softs, as exemplified by the most significant soft constituent, sugar. The S&P GSCI Sugar Index increased 86.26% in 2009 and gained 52.12% in Q3 2010, but still ended the third quarter with a YTD loss of 9.41%. Another key factor in the S&P GSCI softs is the fact that cocoa was the only soft commodity that was not in backwardation at the end of September. The chart on page 3 indicates that at the end of September, the S&P GSCI Softs Index TR was in excess of the spot increase (+5.81% versus +4.42%). The majority of the softs are experiencing supply constraint issues, which is boosting front futures prices and tipping the futures curve into backwardation, providing an extra total return boost when rolling futures contracts. At the end of September, the October 2011 sugar future closed at an extreme 25.6% discount to the front October 2010 contract, indicating currently tight supplies, along with anticipation of alleviating the supply/demand situation in the future. Year-to-date, the S&P GSCI Cotton Index was the best performing single commodity index at the end of September, with a gain of 34.72%. Helping to boast total returns was the contango shaped curve, with a discount of 14% for the Oct. 2011 cotton contract compared to the front Oct. 2010 future. Adverse weather in some of the main growing countries, notably Pakistan, along with increasing global demand, has been cited for cotton strength in 2010.
S&P GSCI Livestock Index
September Total Return: +0.30% (+7.66% YTD, 4.63% weight)
A Ho Hum Q3
The S&P GSCI Livestock Index barely budged in September, ending the quarter with at YTD gain of 7.66% on the back of a 3.54% increase in Q3. Earlier in the 2010 year, weakness in the grains, notably corn and related corn meal (the main source of livestock feed), helped to provide some support to livestock prices. Storage costs and related roll costs are normally a prominent total return factor in the livestock sector, as indicated on the page 3 chart depicting YTD spot returns versus total returns. The S&P GSCI Livestock Index ended Q3 as the second best performing sector index, with a spot index increase of 15.18%, well ahead of the 7.66% total return.
Rebalancing 2011 Summary
The preliminary results for the 2010 S&P GSCI rebalancing were announced on September 29th, coinciding with the annual S&P Commodity Advisory Panel meeting. There are not likely to be any new additions or deletions from the 24 constituent index in 2011. The most significant weight changes are likely to follow a similar pattern to the 2010 rebalancing, within the petroleum component. Due to the increased relative total Dollar value traded (TDVT) amount of brent crude and gasoil relative to WTI crude oil, the contract production weights (CPWs) of brent crude and gasoil will likely be increased and WTI crude oil will likely decrease for 2011. New CPWs are normally announced the first week of November and are instituted during the January roll period. The rules based methodology of the S&P GSCI stipulates that the weights of the components of the S&P GSCI are determined by world production. Petroleum is the largest component and contains five commodities: crude oil, brent, gasoil, heating oil, and unleaded gas. Within a component, the rules stipulate that the relative weights are determined by TDVT. If the TDVT continues to migrate towards brent and gasoil, the S&P GSCI methodology will automatically reflect such migrations with annual adjustments of their relative CPWs, and thus, index weights.
AUM Update
Assets tracking the S&P GSCI at the end of Q2, 2010 were estimated to be approximately the same as they were at the end of Q1 (about US$ 75-80 billion). In-flows, and certainly interest, in the S&P GSCI and S&P commodity indices has remained positive in 2010, but the S&P GSCI ended Q2 with a YTD decline of 11.21%. The S&P GSCI increased 8.5% in Q3, so preliminary, conservative estimates indicate that the assets tracking the S&P GSCI at the end of September are likely to be in the US$ 80-90 billion range. However, these estimates are purely that – estimates, subject to revision and change.
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September Total Return: +0.30% (+7.66% YTD, 4.63% weight)
A Ho Hum Q3
The S&P GSCI Livestock Index barely budged in September, ending the quarter with at YTD gain of 7.66% on the back of a 3.54% increase in Q3. Earlier in the 2010 year, weakness in the grains, notably corn and related corn meal (the main source of livestock feed), helped to provide some support to livestock prices. Storage costs and related roll costs are normally a prominent total return factor in the livestock sector, as indicated on the page 3 chart depicting YTD spot returns versus total returns. The S&P GSCI Livestock Index ended Q3 as the second best performing sector index, with a spot index increase of 15.18%, well ahead of the 7.66% total return.
Rebalancing 2011 Summary
The preliminary results for the 2010 S&P GSCI rebalancing were announced on September 29th, coinciding with the annual S&P Commodity Advisory Panel meeting. There are not likely to be any new additions or deletions from the 24 constituent index in 2011. The most significant weight changes are likely to follow a similar pattern to the 2010 rebalancing, within the petroleum component. Due to the increased relative total Dollar value traded (TDVT) amount of brent crude and gasoil relative to WTI crude oil, the contract production weights (CPWs) of brent crude and gasoil will likely be increased and WTI crude oil will likely decrease for 2011. New CPWs are normally announced the first week of November and are instituted during the January roll period. The rules based methodology of the S&P GSCI stipulates that the weights of the components of the S&P GSCI are determined by world production. Petroleum is the largest component and contains five commodities: crude oil, brent, gasoil, heating oil, and unleaded gas. Within a component, the rules stipulate that the relative weights are determined by TDVT. If the TDVT continues to migrate towards brent and gasoil, the S&P GSCI methodology will automatically reflect such migrations with annual adjustments of their relative CPWs, and thus, index weights.
AUM Update
Assets tracking the S&P GSCI at the end of Q2, 2010 were estimated to be approximately the same as they were at the end of Q1 (about US$ 75-80 billion). In-flows, and certainly interest, in the S&P GSCI and S&P commodity indices has remained positive in 2010, but the S&P GSCI ended Q2 with a YTD decline of 11.21%. The S&P GSCI increased 8.5% in Q3, so preliminary, conservative estimates indicate that the assets tracking the S&P GSCI at the end of September are likely to be in the US$ 80-90 billion range. However, these estimates are purely that – estimates, subject to revision and change.
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Source: ETFWorld – Standard & Poor’s
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