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ETF Securities expands into index business


The ETF Securities Group has launched ETF Securities’ index unit, ETFS Indices LLC.

Led by Dan Raab, head of indices and managed futures, ETFS Indices will design and publish new futures-based indices.
The suite of commodity indices launched by ETFS Indices includes four composite strategy indices based on commodity futures prices. Current composite index types include Commodity Carry, Commodity Long-Short, and Commodity Long-Only. ETFS Indices’ composite strategies are designed to be liquid and replicable, and useful as tools for portfolio diversification.
“Commodity futures display unique characteristics unlike those seen in equities and bonds,” says Raab. “Our new ETF Securities Index unit develops strategies designed to take advantage of common commodity behaviour patterns, aiming to generate returns from long-short, spread, and long-only positions. We view this move into indices as a natural progression for our business in the US.”
Raab has more than 20 years’ experience in structuring commodity and financial derivative transactions and played a key role in the creation of the Dow Jones-UBS Commodity Index. In his role at ETF Securities, he leads a team of experienced index developers in New York.
Indices currently developed by ETFS Indices include:
Commodity Carry Strategy Long-Short Excess Return Index is structured to capitalize on the roll-yield differentials that exist at different points of a commodity futures curve. The goal of this approach is to extract alpha from the commodities markets in a “market-neutral” Index.
Commodity Rotator Strategy Long-Short Excess Return Index is designed to provide a tool for extracting alpha from commodities in a market-neutral way. It incorporates several advanced concepts beyond a basic long-only approach used by traditional commodity benchmarks.
Commodity Rotator Strategy Long-Only Excess Return Index rotates among the available commodities and selects the ones that it deems most likely to provide the highest performance over the next holding period. The investment tenor in each selected commodity is optimized based on the expected carrying costs.
Commodity Diversified Beta Long-Only Excess Return Index is designed to provide a high correlation to the Dow Jones-UBS Commodity Index, while targeting improved performance over time. Composed of commodity futures, the Index is expected to have relatively low correlations to stock and bond markets, and positive correlations to inflation. The model uses several price based indicators to overweight and underweight the commodities relative to the benchmark.

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