CYD Indices
The CYD index is a family of commodity indices, based on a mechanical implementation of an active trading strategy. These trading strategies exploit the special features of commodity futures.
Index Concept
Direct investment in commodities is not possible for most investors, since they do not have the warehousing facilities needed, and many commodities cannot be stored or have a limited lifespan. Investments in commodities are therefore normally not made by purchasing the commodities themselves. Instead, investment in commodities is done by trading commodity futures. Established commodity indices therefore do not reflect the actual price development of the physical commodities themselves, but show the value generation of an investment in commodity futures.
Value generation of an investment in commodity futures differs from value generation of an investment in physical commodities by the amount shown in the gradient of the futures curve (or what is known as the rolling return). This gradient reflects both the expectation of future commodity price development and a risk premium.
The CYD indices are conditioned by the gradient of the futures curve, based on the assumption that the futures curve contains information on the expected risk premium. They are also broadly diversified and rebalanced monthly, in order to exploit the good diversification features of commodity futures.
CYD Index Universe
The CYD Index Universe currently consists of 26 commodity futures.
