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Dow Jones Indexes and AIG launch commodity forward indexes

Dow Jones Indexes, and AIG Financial Products Corp. have launched three new commodity forwards versions of the Dow Jones - AIG Commodity Index.

"We want to be responsive to commodity index investors' needs now that commodities have gained acceptance as a mainstream asset class,' said Michael A. Petronella, President, Dow Jones Indexes/Ventures. 'As forward commodity futures markets have become more liquid, we feel it is important to develop new indexes for investors seeking to take advantage of the different return characteristics of longer-dated commodity futures."

The new Dow Jones - AIG Commodity Forward Indexes will allow investors to measure exposure to longer-dated commodity futures contracts. The DJ-AIG Commodity Index 1 Month Forward, the DJ-AIG Commodity Index 2 Month Forward, and the DJ-AIG Commodity Index 3 Month Forward  were created as tools for investors who have begun to seek increasingly sophisticated tools to manage their commodity investments as they move a portion of their exposure into longer-dated commodity futures. With the expansion of commodity futures markets in recent years, trading volume in further dated contracts has generally increased.

"The story here is that commodity index investors have become increasingly sophisticated about the types of exposure they want in their portfolios, including the option of moving a portion of their overall commodity exposure into longer dated maturities,' said Joseph Cassano, President, AIG Financial Products Corp.  'These new indexes allow investors to do this with the credibility of a benchmark that has attracted in excess of USD 30 billion in assets."

The Dow Jones - AIG Commodity Forward Indexes are constructed according to the rules of the DJ-AIGCI and represent the index composition one, two, and three months into the future. Each of the indexes uses different contract months for the 19 underlying commodity futures. Thus, in July 2006 the DJ-AIG Commodity Index 1 Month Forward includes those commodity futures contracts which will be in the DJ-AIGCI in August. Similarly, in July 2006 the 2 and 3 Month Forward Indexes include those contracts which will be in the DJ-AIGCI in September and October, respectively. Excess and Total Return versions of each of the new indexes are available. The new indexes join the 45 other DJ-AIGCI related indexes and sub-indexes already calculated daily by Dow Jones Indexes and AIG Financial Products Corp. 

As commodity index-based investment has expanded in recent years, investors have increasingly begun to articulate views on the shape of commodity futures curves. These new indexes provide investors with a benchmark to measure the performance of deferred commodity futures markets. While futures markets have continued to develop, investors have also become increasingly sensitive to the details of index construction. These new indexes have the advantage of being constructed according to the rules of the DJ-AIGCI. 

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