The cash-settled contract will allow a broad sector of market participants to hedge commodity and inflation exposure, achieve portfolio diversification, and take advantage of arbitrage opportunities among the various index components. The DowSMJones-AIG Commodity Index is designed to be a liquid and diversified benchmark for commodities as an asset class. Potential benefits of the DJ-AIGCI include positive returns over time and negative correlation with equities and bonds. Academic research has demonstrated that investments in commodities can provide unique portfolio diversification benefits.
AIG International Inc., a subsidiary of AIG Trading, will act as the initial market maker for the futures contract, providing liquidity during market hours. In addition, the futures contract offers pricing transparency, leverage, and the financial safeguards of the AAA rated Board of Trade Clearing Corporation. The DJ-AIGCI futures contract can also be used in an Exchange of Futures for Swaps (EFS) transaction, providing added flexibility for investors.
CBOT® Executive Vice President Bernard Dan said, "This contract combines the indexing experience of DowSMJones Indexes and the commodities expertise of AIG Trading with the CBOT®'s unmatched liquidity and market integrity. It has the potential to become the preeminent commodity index futures product, and will promote trading opportunities for institutional investors and our members."
Adam De Chiara, Senior Vice President of AIG Trading, said, "The DJ-AIGCI represents an innovative and compelling approach to this asset class. The Index design emphasizes broad-based and diversified exposure to commodities along with liquidity and ease of implementation. The CBOT® contract will provide market participants the opportunity to hedge inflation exposures and express macro-economic views on real asset prices."
"We are very pleased that the launch of the DowSMJones-AIG Commodity Index not only expands DowSMJones Indexes' presence on the CBOT® but also does so with an indexed product that offers investors true diversification possibilities," said David E. Moran, President of DowSMJones Indexes. "We will continue working with AIG Trading to bring the benefits of the DowSMJones-AIG Commodity Index to a broadening segment of investors worldwide."
The 20 Commodities currently in the DJ-AIGCISM are :Aluminum, Cattle, Cocoa, Coffee. Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Hogs, Natural Gas, Nickel, Silver, Soybeans, Soybean Oil, Sugar, Unleaded Gas, Wheat, and Zinc
