to serve as the new benchmark for the iShares Broad Commodity Index Fund. This exchange-traded fund (ETF) trades on the Toronto Stock Exchange under the symbol “CBR,” and began tracking the Morningstar index on Nov. 30, 2012. The Morningstar Global Long/Flat Commodity Index is a fully collateralized commodity futures index that uses a momentum rule to determine if each commodity is held long or the assets are moved to cash. This is the first investable vehicle listed in Canada to track the Morningstar Global Long/Flat Commodity Index.
“There are two potential sources of return when investing in commodities futures—price change and roll yield,” Jeff Logan , head of iShares Product, BlackRock Canada, said. “We selected the Morningstar Global Long/Flat Commodity Index as the benchmark for our Broad Commodity Index Fund because of its superior methodology that aims to maximize both the changes in commodity prices and the potential returns generated by rolling the future contracts.”
For each commodity in the index, Morningstar calculates a “linked” price series that incorporates both price changes and roll yield (the loss or gain that results from replacing an expiring contract with one that matures further in the future). At each monthly rebalancing, Morningstar evaluates whether changes should be made to the direction of the individual commodities in the index. The decision to change direction is based on whether the linked price is above or below its 12-month daily moving average.
“We are pleased that BlackRock Canada has licensed our index for an exchange-traded product,” Sanjay Arya , senior vice president of Morningstar Indexes, said. “We have seen a tremendous increase in investor appetite for commodities in recent years given their low correlation to traditional asset classes and potential hedge against inflation. The Morningstar Global Long/Flat Commodity Index provides investors with a transparent benchmark that harnesses the natural momentum in the commodities futures market.”
The Morningstar Global Long/Flat Commodity Index tracks the performance of the most liquid exchange-listed commodities futures contracts. Individual commodities are weighted according to the dollar value of their open interest. Morningstar employs this system to maintain a diverse exposure across the spectrum of commodities and to reflect the importance of each commodity in the global economy. The index is calculated once a day, rebalanced monthly, and reconstituted annually. All of Morningstar’s commodity indexes have a history going back to 1980 and use a transparent, rules-based methodology.
Introduced in 2002, the Morningstar Indexes include a broad range of traditional beta global equity, fixed income, and commodity indexes that are also combined to form an asset allocation index series. Morningstar Indexes also offers a series of active equity indexes that draw on the equity, fund, and asset allocation research across the company. Currently, 32 ETFs and one ETN track Morningstar Indexes globally. For more information about all of Morningstar’s indexes, visit http://indexes.morningstar.com. Morningstar Indexes is part of the Morningstar Investment Management division.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $195 billion in assets under advisement and management as of Sept. 30, 2012. The company has operations in 27 countries.
The BlackRock ETF will not be sponsored, endorsed, issued, sold or promoted by Morningstar, and Morningstar makes no representation regarding the advisability of investing in it.
SOURCE Morningstar Research Inc.