Morningstar has introduced five commodity futures indexes, the Morningstar Long/Short, Long/Flat, Short/Flat, Long-Only and Short-Only Commodity Indexes. Each consists of a combination of long futures, short futures and cash.
They are designed to serve as benchmarks for investors as well as to support the creation of passive investment products that serve as alternatives to active commodity investing.
“Commodities futures strategies can provide significant benefits to a long-term strategic portfolio,” said Sanjay Arya, director of Morningstar Indexes. “They have low correlations to traditional asset classes, offer a hedge against inflation and can provide diversification through superior returns in bad equity markets. And a combination of long and short positions can allow investors to take advantage of the momentum that commodity futures prices often exhibit.”
For each of the 20 commodities that the indexes track, Morningstar calculates a price series that incorporates both price changes and roll yield, which is the loss or gain that results from replacing an expiring contract with one that matures further in the future.
Morningstar will calculate the indexes each day, rebalance them monthly and reconstitute them each year.
Morningstar will be making the indexes available through major data providers, media outlets, and in its own products and on its own website.
These five indexes are in addition to a total of 45 that Morningstar already offers. The company offered its first index in 2002.