Salient Features of The DBLCI
Two of the main distinguishing features between the DBLCI and other commodity indices relate to the number of components and the overall allocation to the energy complex. While the number of commodities in the S&P Goldman Sachs Commodity Index, Dow Jones-AIG and the Reuters-Jeffries/CRB index are broadly similar ranging from 19 to 24 commodities, the DBLCI has just six commodities. The allocation to energy also differs substantially ranging from 70% in the S&P GSCI, 55% in the DBLCI, 39% in the RJ/CRB and 33% in the Dow Jones-AIG.
A lower number of commodities in an index can offer certain advantages. For example, it involves an investor in only the most liquid commodity contracts in their respective sectors. Last year, aluminium accounted for 46% of combined turnover on the LME. Consequently a commodity index which has part of its basket in lead or nickel would entail greater liquidity risk since these two metals constitute only 11% of total turnover on the LME. Energy markets exhibit a similar degree of market concentration with the benchmark West Texas Intermediate (WTI) crude oil contract representing 37% of total energy futures turnover on NYMEX in 2006.
Read more about this topic: Deutsche Bank Liquid Commodity Index
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