Citi has launched a suite of upgraded beta indices linked to commodity markets. Known collectively as the Citi CUBES Commodity Indices, they allow investors to access commodity futures markets using a transparent, rules-based methodology.
Reportedely, in contrast to traditional beta indices, Citi CUBES will invest predominantly in longer maturity futures contracts to limit the high roll costs that often result from upward sloping forward curves. Citi CUBES uses a simple mechanism to forecast a shape for the futures curve at the beginning of each investment period. Based on the forecast, Citi CUBES invests in futures contracts that are expected to provide the highest investment yield. Citi CUBES can invest in contracts up to one year in maturity.
Ravi Ramachandran, head of commodity new products structuring at Citi, said: “By investing further out on the curve in an intelligent manner, we not only provide clients with the potential for enhanced returns but also allow them to avoid some of the high volatility typically seen in front-month investments.”
Iain Armitage, head of commodity investor products at Citi, said: “The Citi CUBES Index suite, used in conjunction with Citi’s custom index capabilities, will allow our clients to access commodities markets through tailor-made solutions designed individually for their needs.”
