UBS AG and Bloomberg L.P. today launched the UBS Bloomberg Constant Maturity Commodity Index family.

This global index family will not only cover a broad range of commodities, but will also introduce a time dimension by providing access to a range of different investment maturities for each of these commodities. The index family will be published in U.S. dollars and Euros.

The CMCI is designed to be an international benchmark for modern commodity investment. It is composed of a basket of 28 commodity futures with a series of available investment maturities for each individual commodity using an innovative calculation methodology. This will allow investors much greater flexibility in their risk profile, the firms say.

The CMCI is weighted to reflect the relative importance of each individual commodity in the index to the world economy – with weights based on a blend of economic indicators (GDP, PPI, and CPI) as well as liquidity and open interest of the underlying futures contracts.

“Since the early nineties, the primary avenue available for investing in commodities has been via traditional indices. These indices performed well for a period of time, but over the last few years it has become increasingly clear that investors need diversification across maturities as well as across commodities; currently investors are limited to short-dated maturities in the traditional indices,” the firms say. “The limitation to short-dated maturities has had several negative repercussions for the investor and more recently has been responsible for a significant deterioration of overall returns.”

UBS and Bloomberg say they believe that the solution to many of the recent issues faced by investors lies not in creating increasingly complex vehicles, but in providing greater flexibility and choice. The UBS Bloomberg Constant Maturity Commodity Index allows investors to easily diversify across maturities and commodities and more efficiently adapt their commodity index investment to the current economic environment.