IQAM Commodity Index

Spängler IQAM Invest has created two proprietary commodity indices: IQAM Commodity Index and IQAM Non-Food Commodity Index.

A combination of various commodities ensures diversification. This index utilises the forward curve by purchasing the contract1 with the maximum contango2 or the minimum backwardation3. The index’s commodities are selected each month following a strict process, making it a highly dynamic index.

The IQAM Commodity Index chooses from a universe of 24 commodities in the energy, agriculture, precious metals and base metals categories. Each month, 14 of these commodities are selected and equal weighted. The IQAM Non-Food Commodity Index chooses from a universe of 14 commodities in the energy, precious metals and base metals categories. Each month, 10 of these commodities are selected and equal weighted.

To achieve the optimum composition, the commodities are selected in a three-stage process:

  • Stage 1: Selection of the 7 commodities with the strongest backwardation (spot price exceeds futures price) or the weakest contango (spot price below futures price) in the forward curve (7 commodities in the IQAM Commodity Index, 5 commodities in the IQAM Non-Food Commodity Index)
  • Stage 2: Selection of the 7 commodities with the strongest 12-month momentum4 (7 commodities in the IQAM Commodity Index, 5 commodities in the IQAM Non-Food Commodity Index)
  • Stage 3: Positioning of the various commodities on the forward curve based on the strongest backwardation or the weakest contango.

The graph above shows the trend in the two indices.

Implementation in the Strategic Commodity Fund is based on a swap on the IQAM Commodity Index. Here you can find the IQAM Commodity Index Handbook

1 Minimum tradable unit
2 Gains from rolling over contracts, if the spot price is above the futures price
3 Losses from rolling over contracts, if the spot price is below the futures price
4 Momentum is a basic indicator that reflects the strength of a trend. The momentum is the difference between the current price and the price x days before.