Understanding the Composition of Global Commodity Indices in Investment Portfolios

The investment portfolio is divided into three sleeves: equity, fixed income, and commodity./nThe commodity sleeve typically models major global commodity indices that are weighted based on flows and liquidity of commodity contracts./nThe commodity indices are representative of inputs to the economic engine, and they tend to wait more liquid contracts with substantially more weight than less liquid ones./nHowever, the major commercial indices are highly concentrated, with over 30% of the portfolio in the energy complex alone, and the rest in heavy concentration in metals and grains.