Battling the benchmark

In 2007, investors demanded more active commodity indexes to capitalise on the bull run in the asset class. But benchmarks and beta offerings alike were hit by last year’s drawdown. Will this lead investors to abandon directional offerings in favour of absolute return strategies? Sophia Morrell reports

The battle between investment banks and index providers for the title of who can create the most efficient commodity indexes has been underway since the latest commodity bull run took hold in 2006. However, investors soon learned that roll yield can split indexes from the spot price of the commodity they are designed to track. When commodity curves steepen, it becomes increasingly expensive to roll into a new futures contract each month, which eats into returns. As climbing prices attracted