Class A Details: CMCAX
| INCEPTION DATE | GROSS/NET EXPENSES1 |
|---|---|
| 12/31/10 | 1.28%/0.95% |
Fund Literature
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Methodology of the Fund's Underlying Index: CMCI
UBS CMCI Highlights
- Diversified across 29 commodities and five maturities
- Potential for higher risk-adjusted returns than traditional commodity indices
- Constant maturity approach: daily rolling of a small proportion of underlying futures
- Monthly rebalancing: limited concentration risk in any one underlying commodity
The UBS Constant Maturity Commodity Index ("CMCI") diversifies across 29 commodity components and up to five maturities. The CMCI chooses between maturities of five “constant maturities”: three-month and six-month and one-, two- and three-year maturities for certain commodities. This can be done either selectively for individual commodities to diversify over time, or collectively for all those included in the index to diversify both across commodities and over time. In periods of persistent contango, this allows the index to place its exposure at more favorable (i.e., less sloping) sections of the futures curve and keep it there. This can prevent slippage into the steeper part of the curve, or the portion of the curve typically associated with higher roll losses.
Key Investment Terms
CONTANGO
"Contango" refers to an upward sloping term structure, in which indices that hold front-month contracts will incur a cost each time contracts expire and must be rolled to more expensive, longer-dated contracts. As contracts move closer to expiration, their value converges with spot prices. So, “contango cost” usually is measured by the difference between spot prices and front-month futures.
BACKWARDATION
"Backwardation" is the opposite of contango, and refers to a downward sloping term structure. Backwardation tends to occur in contracts and during periods when traders are concerned about scarcity of supplies. Thus, traders would rather have commodities in-hand now (spot) than in the future, and will pay for the privilege.
ROLL YIELD
"Roll Yield" refers to the positive or negative contribution caused by rolling an expiring contract.