UBS and Diapason Commodities Management have launched the first commodity-based index for biological fuels.
The UBS Diapason Global Biofuel Index (UBS-D GBFI), which is published in USD, EUR, CHF and JPY, covers a range of commodities used in the production of ethanol and biodiesel. It is designed to be a highly liquid and international benchmark for biofuel investments and is weighted to reflect the importance of different feedstocks used in the production of ethanol and biodiesel as well as the liquidity of the underlying futures contracts.
It is composed of futures contracts on 10 physical commodities related to the global production of ethanol and biodiesel. As of index launch, the two biofuel groups have respective weights of 83.01% for ethanol and 16.99% for biodiesel.
The Index Composition and weightings of all underlying commodities as of 1 March 2006 are as follows:
Biofuel group Ethanol: Corn (30.00%), Sugar #11 (29.26%), Sugar #5 (3.71%),
Wheat (13.81%), Barley (1.28%), Rice (2.21%), Lumber (2.74%)
Biofuel group biodiesel: Rapeseed (7.17%), Canola (3.03%), Soybean Oil (6.80%)
To help ensure a high level of diversification, the UBS-D GBFI relies on the rule that no single component may constitute more than 30% of the index as of the semi-annual re-weightings in May and November.
This innovative index aims to add a new dimension to the liquid commodities indices and can serve as a suitable basis for a variety of structured financial products. Its launch means that investors will, for the very first time, have access to an efficient and liquid investment instrument that gives them exposure to the market performance of alternative fuels.
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