UBS Investment Bank has launched the ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN (Ticker: BLND), the first exchange-traded note linked to the next generation of the DJ-UBS Commodity Index, one of the most widely followed, diversified indexes of commodities futures prices.
BLND is linked to the Dow-Jones-UBS Commodity Index 2-4-6 Forward Blend Total ReturnSM (Ticker: DJUF246T), an enhanced version of the Dow-Jones-UBS Commodity Index. The Index is constructed as an equally-weighted basket of the two-month, four-month and six-month forward versions of the Dow Jones-UBS Commodity Index, providing diversification across the commodity price curve of each of the 20 commodities that currently comprise the index.
By diversifying exposure across multiple commodity futures maturities, the Index seeks to limit concentration at any one point on the respective commodity futures price curve. Historically, including exposure to longer-dated maturities has helped to mitigate the costs associated with holding and rolling shorter-dated commodity futures positions, commonly referred to as “negative roll yield.”
“Negative roll yield adversely impacts returns on exchange-traded products based on commodity futures positions,” says Christopher Yeagley, Managing Director and US Head of Equity Structured Products. “The ETRACS DJ-UBS Commodity Index 2-4-6 Blended Futures ETN – the first ETN based on the second generation of the benchmark Dow Jones-UBS Commodity index – gives investors the opportunity to minimise roll risk through its diversified exposure to the Index’s longer dated futures positions.”