Aluminum, Commodities Star in New Funds From Global X, Van Eck

The Van Eck CM Commodity Index Fund tracks, before fees and expenses, the performance of UBS Bloomberg Constant Maturity Commodity Total Return Index (CMCI). Kristen Capuano, marketing director at Van Eck, said in a statement that the fund was designed to counter the “negative roll yield that occurs during periods of contango” through “using a benchmark that places less emphasis on the front end of the futures curve.”

Contango, explains the company, “occurs when the price of a futures contract exceeds the expected spot price at contract expiration.” That means that during periods of contango, sellers benefit from a fall in futures prices. “Conversely, backwardation occurs when the price of a futures contract is below the expected spot price at contract expiration.” Under these conditions, buyers benefit from rising futures prices, and this is called roll yield. Negative roll yield, on the other hand, is the return lost during contango.

The CMCI is rebalanced monthly so that the risk of overconcentration in any single area is minimized. It is unlike traditional indices in that it is diversified along the entire curve and uses a continuous roll, according to the company.