SDCI Methodology

SummerHaven Dynamic Commodity Indexsm (“SDCI”)

SDCI INDEX METHODOLOGY


SDCI – INDEX PHILOSOPHY

The SummerHaven Dynamic Commodity Index (“SDCI”) was developed by SummerHaven Index Management to provide an active commodity index benchmark for investors. The SDCI is based on the notion that commodities with low inventories will tend to outperform commodities with high inventories, and that priced-based measures, such as futures basis, can be used to help assess the current state of commodity inventories1.


SDCI – INDEX CONSTRUCTION

The SDCI selects 14 commodity contracts with equal weighting from a universe of 27 eligible commodities each month through three steps:

STEP 1: Commodity Selection – Backwardation

Choose 14 commodities with the greatest backwardation (or least contango). Backwardation is measured as the annualized % price difference between the futures price for the closest-to-expiration contract and the next closest-to-expiration contract for each commodity.

STEP 2: COMMODITY SELECTION – DIVERSIFICATION

SDCI requires at least one component from each of the four commodity sectors: Precious Metals, Industrial Metals, Petroleum, and Grains. If a sector isn’t represented after selecting the 14 commodities, the commodity with the highest backwardation among the commodities of the omitted sector is substituted for the commodity with the lowest backwardation among the 14 selected commodities.

STEP 3: Contract Month Selection

For each of the 14 index commodities, SDCI selects the contract month with the greatest backwardation (or least contango), taking into account the allowed contracts and maximum tenor for each commodity market.

The maximum eligible tenor is measured as the number of months starting from the maturity of the closest-to-expiration contract. The previous not withstanding, the contract expiration is not changed for that month if a commodity remains in the index, as long as the contract does not enter expiry or enter its notice period in the subsequent month.

COMMODITY SYMBOL COMMODITY NAME SECTOR ALLOWED CONTRACTS MAX. TENOR
CL Crude Oil Petroleum All 12 Calendar Months 9
XB RBOB Petroleum All 12 Calendar Months 4
HO Heating Oil Petroleum All 12 Calendar Months 4
CO Brent Crude Petroleum All 12 Calendar Months 9
QS Gas Oil Petroleum All 12 Calendar Months 4
W Wheat Grains Mar, May, Jul, Sep, Dec 4
C Corn Grains Mar, May, Jul, Sep, Dec 4
S Soybeans Grains Jan, Mar, May, Jul, Aug, Nov 4
SM Soymeal Grains Jan, Mar, May, Jul, Aug, Sep, Oct, Dec 3
BO Bean Oil Grains Jan, Mar, May, Jul, Aug, Sep, Oct, Dec 1
LA Aluminum Industrial Metals All 12 Calendar Months 4
HG Copper Industrial Metals Mar, May, Jul, Sep, Dec 1
LX Zinc Industrial Metals All 12 Calendar Months 4
LN Nickel Industrial Metals All 12 Calendar Months 4
LL Lead Industrial Metals All 12 Calendar Months 4
LT Tin Industrial Metals All 12 Calendar Months 1
GC Gold Precious Metals Feb, Apr, Jun, Aug, Oct, Dec 1
SI Silver Precious Metals Mar, May, Jul, Sep, Dec 1
PL Platinum Precious Metals Jan, Apr, Jul, Oct 1
SB Sugar Misc Mar, May, Jul, Oct 3
CT Cotton Misc Mar, May, Jul, Dec 1
KC Coffee Misc Mar, May, Jul, Sep, Dec 1
CC Cocoa Misc Mar, May, Jul, Sep, Dec 1
NG Natural Gas Misc All 12 Calendar Months 6
LC Live Cattle Misc Feb, Apr, Jun, Aug, Oct, Dec 3
LH Lean Hogs Misc Feb, Apr, Jun, Jul, Aug, Oct, Dec 1
FC Feeder Cattle Misc Jan, Mar, Apr, May, Aug, Sep, Oct, Nov 1

SDCI Rebalancing:

Price observations for the steps described above are taken on the fifth-to-last business day of each month. SDCI rebalancing takes place during the last four business days of the month. At the end of each of these days one fourth of the prior month portfolio positions are replaced by an equally-weighted position in the commodity contracts determined on the selection date. At the end of the rebalancing period, the SDCI targets an equal-weight position of approximately 7.14% in each of the selected commodity contracts.

REBALANCING START REBALANCING END
Thursday, January 26, 2023 Tuesday, January 31, 2023
Thursday, February 23, 2023 Tuesday, February 28, 2023
Tuesday, March 28, 2023 Friday, March 31, 2023
Tuesday, April 25, 2023 Friday, April 28, 2023
Thursday, May 25, 2023 Wednesday, May 31, 2023
Tuesday, June 27, 2023 Friday, June 30, 2023
Wednesday, July 26, 2023 Monday, July 31, 2023
Monday, August 28, 2023 Thursday, August 31, 2023
Tuesday, September 26, 2023 Friday, September 29, 2023
Thursday, October 26, 2023 Tuesday, October 31, 2023
Monday, November 27, 2023 Thursday, November 30, 2023
Tuesday, December 26, 2023 Friday, December 29, 2023

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1 Geert Rouwenhorst, SummerHaven partner and Yale professor, is a recognized leader for his academic research linking commodity futures returns to inventories:
See “The Fundamentals of Commodity Futures Returns” Review of Finance (2013), pp. 35-105.