Commodity index facelift aimed to lure investors Fri Jul 8, 2005 1:35 PM ET Printer Friendly | Email Article | Reprints | RSS Top News Hurricane Dennis heads north after hammering coast
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By Jeff Coelho
NEW YORK, July 8 (Reuters) - Financial tailors behind the revamped Reuters/Jefferies CRB futures index say they hope their makeover will attract investors when the New York Board of Trade launches futures and options for the index next week.
"If we've done our job right, I'd expect to see significant interest in the index," said Tom Gros, executive vice president and global head of equities, commodities and energy at Reuters.
"Given the history of markets and new indices, these things tend to have a slow start to them and you have to be a bit patient. But then the successful ones do tend to take off," he added.
The widely watched RJ/CRB Index, formerly known as the Reuters CRB Futures Price Index, was tweaked with a new name and weighting in June to reflect the increased liquidity within the commodities sector.
Three new commodities -- unleaded gasoline, aluminum and nickel -- were added, while platinum was given the boot. The index now has 19 products, and is often used by money managers, analysts and traders as a sector benchmark.
Record-high oil prices and soaring demand for raw products have helped lure investors to the commodities markets over the past two years, elevating prices and the sector's status as a viable investment for portfolio diversification during periods of global economic ebbs or flows, peace or instability.
Thursday's deadly bomb attacks in London barely dented interest in commodities as an asset class. After initially falling on the news, the RJ/CRB touched a three-month high on Friday.
Indeed, the uptrend in the old CRB, which reached 24-year highs in March, can be traced back to the immediate aftermath of the Sept. 11 attacks on the United States in 2001.
"The bottom line right now is that demand outpaces supply as far as commodities is concerned, and it starts at the manufacturing level," said Scott Baldwin, executive vice president and director of Price Asset Management Inc., an affiliate of futures brokerage Price Futures Group Inc.
"For the foreseeable future commodities are going to remain in demand, and how that's reflected in the price remains to be seen," he added.
The CRB Index had undergone nine previous weighting revisions since its inception in 1957, when it had been heavily weighted by agricultural commodities.
Other popular commodity indexes include the Goldman Sachs Commodities Index, the Dow Jones-AIG Commodities Index and the Rogers Raw Materials Index.
Frank Holmes, chief investment officer at U.S. Global Investors Inc., said billions of dollars have been invested in commodities indexes.
"I think that people are looking at this as being a more respectful asset class. The risks are that people overweight them as an asset class," he said.
Trading in futures contracts for the RJ/CRB index start on Tuesday, with options following the next day. Trading hours will be from 10 a.m. to 2:30 p.m. EDT (1400-1830 GMT).
The new contracts will trade under the old CRB symbol, CR, and the first listed contract month will be September 2005.
Meanwhile, the previous version of the CRB has become the Continuous Commodity Index, listed under the symbol CI. NYBOT will continue to list contracts for the CCI.
The component weightings of the index will be rebalanced monthly, and the index enables expiring futures contracts to roll over to the deferred monthly contracts.
The RJ/CRB index traded at 311.18 Friday afternoon.
