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The Deutsche Bank Liquid Commodity Index

Launched in 2003 by Deutsche Bank, the Deutsche Bank Liquid Commodity Index (DBLCI) is the new kid on the index block and has the most distinct approach to tracking commodity futures contracts. The DBLCI tracks just six commodity contracts: two in energy, two in metals, and two in agricultural products.

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The weighting of the DBLCI is done at the end of the year, and it seeks to reflect global production values. Hence, as with the other production-weighted indexes (such as the S&P GSCI), it’s also overweight energy because this reflects the current production values in the world.

Commodity Exchange Weight
WTI crude oil CME 35%
Heating oil CME 20%
Aluminum LME 12.5%
Corn CME 11.25%
Wheat CME 11.25%
Gold CME 10%

With so few underlying commodities, you may be asking whether the DBLCI offers a broad and diverse enough exposure to the commodities markets. One of the advantages of the DBLCI is that it chooses only the most liquid and representative commodities in their respective component classes.

For example, the West Texas Intermediate (WTI) Crude Oil contract is indicative of where the energy complex is moving. So instead of including unleaded gas, propane, natural gas, and other energy contracts, the DBLCI relies on WTI as a benchmark to achieve representation in the energy market as a whole.

This approach is unique in the world of commodity indexes: The index can track the commodities markets by monitoring the performance of only a small number of commodities. This “less is more” approach is also helpful for individual investors who prefer to track indexes by buying the index contracts: Instead of buying 19 contracts, you have to buy only 6 contracts to mirror the index’s performance.

The energy contracts of the DBLCI are rolled monthly; the metal and agricultural contracts are rolled annually.

The DBLCI is the first commodity index to have its performance tracked by an exchange-traded fund (ETF). You can buy the ETF and get exposure to the DBLCI on the American Stock and Options Exchange (AMEX). Deutsche Bank also manages this fund, whose ticker symbol is DBC.

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