We Believe it is Possible to Identify Long-Term Sources of Return in Commodity Futures Based on Fundamental Signals About the Underlying Physical Markets.
We'd like to stay in touch - please submit this form to tell us more about yourself.
 

SummerHaven Dynamic Commodity Index℠ ("SDCI")

SDCI Index Methodology


SDCI – Index Philosophy

The SummerHaven Dynamic Commodity Index ("SDCI") was developed by SummerHaven Index Management to provide an active commodity index benchmark for investors. The SDCI is based on the notion that commodities with low inventories will tend to outperform commodities with high inventories, and that priced-based measures, such as futures basis and price momentum, can be used to help assess the current state of commodity inventories1.


SDCI – Index Construction

The SDCI selects 14 commodity contracts with equal weighting from a universe of 27 eligible commodities each month through three steps:

STEP 1: Commodity Selection – Backwardation

Choose 7 commodities with the greatest backwardation (or least contango).
Backwardation is measured as the annualized % price difference between the futures price for the closest-to-expiration contract and the next closest-to-expiration contract for each commodity.

SDCI Index Methodology

STEP 2: Commodity Selection – Momentum

From the remaining 20 commodities, choose 7 commodities with greatest 12-month price momentum, subject to a diversification requirement*. Momentum is measured as the % price difference between the futures price for the closest-to-expiration contract and the price of the closest-to-expiration contract 12-months ago for each commodity.

SDCI Index Methodology

STEP 3: Contract Month Selection

For each of the 14 index commodities, SDCI selects the contract month with the greatest backwardation (or least contango), taking into account the allowed contracts and maximum tenor for each commodity market.

The maximum eligible tenor is measured as the number of months starting from the maturity of the closest-to-expiration contract. The previous not withstanding, the contract expiration is not changed for that month if a commodity remains in the index, as long as the contract does not enter expiry or enter its notice period in the subsequent month.

  Commodity Symbol Commodity Name Sector Allowed Contracts Max. tenor  
  NG Natural Gas Energy All 12 Calendar Months 12  
  CL Crude Oil Energy All 12 Calendar Months 12  
  XB RBOB Energy All 12 Calendar Months 12  
  HO Heating Oil Energy All 12 Calendar Months 12  
  CO Brent Crude Energy All 12 Calendar Months 12  
  QS Gas Oil Energy All 12 Calendar Months 12  
  LC Live Cattle Livestock Feb, Apr, Jun, Aug, Oct, Dec 5  
  LH Lean Hogs Livestock Feb, Apr, Jun, Jul, Aug, Oct, Dec 5  
  FC Feeder Cattle Livestock Jan, Mar, Apr, May, Aug, Sep, Oct, Nov 5  
  W Wheat Grains Mar, May, Jul, Sep, Dec 7  
  C Corn Grains Mar, May, Jul, Sep, Dec 12  
  S Soybeans Grains Jan, Mar, May, Jul, Aug, Sep, Nov 12  
  SM Soymeal Grains Jan, Mar, May, Jul, Aug, Sep, Oct, Dec 7  
  BO Bean Oil Grains Jan, Mar, May, Jul, Aug, Sep, Oct, Dec 7  
  LA Aluminum Industrial Metals All 12 Calendar Months 12  
  HG Copper Industrial Metals All 12 Calendar Months 12  
  LX Zinc Industrial Metals All 12 Calendar Months 7  
  LN Nickel Industrial Metals All 12 Calendar Months 7  
  LL Lead Industrial Metals All 12 Calendar Months 7  
  LT Tin Industrial Metals All 12 Calendar Months 7  
  GC Gold Precious Metals Feb, Apr, Jun, Aug, Oct, Dec 12  
  SI Silver Precious Metals Mar, May, Jul, Sep, Dec 5  
  PL Platinum Precious Metals Jan, Apr, Jul, Oct 5  
  SB Sugar Softs Mar, May, Jul, Oct 7  
  CT Cotton Softs Mar, May, Jul, Dec 7  
  KC Coffee Softs Mar, May, Jul, Sep, Dec 7  
  CC Cocoa Softs Mar, May, Jul, Sep, Dec 7  

SDCI Rebalancing:

Price observations for the steps described above are taken on the fifth-to-last business day of each month. SDCI rebalancing takes place during the last four business days of the month. At the end of each of these days one fourth of the prior month portfolio positions are replaced by an equally-weighted position in the commodity contracts determined on the selection date. At the end of the rebalancing period, the SDCI targets an equal-weight position of approximately 7.14% in each of the selected commodity contracts.

  REBALANCING START REBALANCING END  
  January 28, 2013 January 31, 2013  
  February 25, 2013 February 28, 2013  
  March 25, 2013 March 28, 2013  
  April 25, 2013 April 30, 2013  
  May 28, 2013 May 31, 2013  
  June 25, 2013 June 28, 2013  
  July 26, 2013 July 31, 2013  
  August 27, 2013 August 30, 2013  
  September 25, 2013 September 30, 2013  
  October 28, 2013 October 31, 2013  
  November 25, 2013 November 29, 2013  
  December 26, 2013 December 31, 2013  


«  BACK


1 Geert Rouwenhorst, SummerHaven partner and Yale professor, is a recognized leader for his academic research linking commodity futures returns to inventories:
See “The Fundamentals of Commodity Futures Returns” under Reference Materials.

* Diversification requirement: SDCI requires at least one component from each of the six commodity sectors: Precious Metals, Industrial Metals, Energy, Livestock, Softs, and Grains. If a sector isn't represented after selecting the 7 momentum commodities, the commodity with the highest price change among the commodities of the omitted sector is substituted for the commodity with the lowest price change among the seven momentum commodities.