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
Wednesday, January 26, 2022 Monday, January 31, 2022
Wednesday, February 23, 2022 Monday, February 28, 2022
Monday, March 28, 2022 Thursday, March 31, 2022
Tuesday, April 26, 2022 Friday, April 29, 2022
Wednesday, May 25, 2022 Tuesday, May 31, 2022
Monday, June 27, 2022 Thursday, June 30, 2022
Tuesday, July 26, 2022 Friday, July 29, 2022
Friday, August 26, 2022 Wednesday, August 31, 2022
Tuesday, September 27, 2022 Friday, September 30, 2022
Wednesday, October 26, 2022 Monday, October 31, 2022
Friday, November 25, 2022 Wednesday, November 30, 2022
Tuesday, December 27, 2022 Friday, December 30, 2022

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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.