Jim Rogers, the commodity investment guru, has collaborated with ABN Amro to launch the RICI Enhanced Indices, an optimized version of his earlier RICI Indices.
According to ABN Amro, ‘unlike the ‘one-size-fits-all’ approach exhibited in traditional commodity indices, the RICI Enhanced seeks to find value in treating each commodity differently. The RICI Enhanced family aims to achieve an attractive risk reward profile through a tailor-made contract selection and rolling mechanism. This mechanism is designed to mitigate the negative roll yield problem experienced by many investors when the market moves into a contango. At the same time, it should still retain the positive roll yield when market is in backwardation.’
ABN Amro says it has made it possible to participate in the global development of commodities with a range of structured products linked to the RICI Enhanced Indices. These include tracker certificates and capital protected securities.
Jim Rogers says: ‘In contrast to other mainstream commodity indices which invest mostly in front-month contracts, the RICI Enhanced Indices target higher risk-adjusted returns by using intelligent contract rolling and investing at different parts of the futures curve.’
‘Contracts are chosen based on seasonality and liquidity filters and their rolling schedule is determined from the term structure and liquidity. In this way, the RICI Enhanced indices are capable of capturing higher returns from the underlying commodity whilst demonstrating lower historic volatility.’
The RICI Enhanced Global consists of 37 underlying commodities, which in turn form the three underlying indices: RICI Enhanced Agriculture, RICI Enhanced Energy, and RICI Enhanced Metal. It is therefore possible to invest in a broad commodities basket or just in agricultural products, energy or metals. In the RICI Enhanced Indices, commodities are weighted in accordance with global consumer patterns (as advised by Jim Rogers) and liquidity of underlying contracts.
The RICI Enhanced family of indices comprises:
- RICI Enhanced Global Index (Bloomberg: RIEHGL Index)
- 3 Sector Indices: RICI Enhanced Energy, RICI Enhanced Agriculture, and RICI Enhanced Metals
- 37 individual commodity indices
The RICI Enhanced Global and Sector indices are long-only indices with direct exposure to a wide range of commodities. The RICI Enhanced family includes individual indices on each underlying commodity, so as to give investors flexibility in terms of constructing their own customised portfolio.
Weights in the Global and Sector indices are allocated according to global consumption patterns given by Jim Rogers. The index weighting is reassessed annually by an oversight committee including both ABN Amro and Jim Rogers’ Beeland Interests Inc. The indices are re-balanced on a semi-annual basis.
