The UBS Bloomberg Constant Maturity Commodity Total Return Index
(ticker: CMCITR), a modern commodity index designed to reduce the
potential negative effects of contango, returned 3.59 percent
during July and 6.69 percent year-to-date (YTD), outpacing the two
most popular traditional commodity benchmarks: the Dow Jones UBS
Commodity Index (DJUBSTR, up 2.96 percent in July and 0.31 percent
YTD) and the S&P GSCI Total Return Index (SPGSCITR, up 2.44
percent in July, 5.21 percent YTD). Contango, as mentioned above,
refers to an upward sloping futures curve, which is a major concern
for commodity investors.
CMCITR is diversified across 27 commodity constituents and up to
five maturities. Its constant maturity approach is designed to
minimize investment exposure to the front end of the futures curve,
and by diversifying exposure across the forward futures curve, the
index seeks to mitigate the impact of contango, a major concern for
commodity investors.
First published in January 2007, CMCITR is the underlying index
of the Van Eck CM Commodity Index Fund (tickers: CMCAX, COMIX,
CMCYX), a passively-managed mutual fund launched at yearend 2010.
“As we look back on the commodity markets during a volatile first
half of 2011 and a tumultuous start to the second half of the year,
we remain convinced of the benefits of the constant maturity
approach,” said Kristen Capuano, Marketing Director for Van Eck
Funds. “The performance history of numerous commodity funds has
shown that whether a manager is long-only or long/short, it is
difficult to consistently predict the shape of futures curves.
Further, traditional indexes continue to suffer from negative roll
yield during periods of contango, which can significantly reduce
performance.”
Contango Defined
Contango refers to an upward-sloping futures curve. When a curve
is in contango, the futures price is greater than the spot price.
As a result, the price of a futures contract is greater than the
price of an expiring contract. When this occurs, investors will
incur an added cost each time a contract expires and it is rolled
over and replaced it with another contract.
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the
first U.S. money managers helping investors achieve greater
diversification through global investing. Today the firm continues
this 50+ year tradition by offering global investment choices in
hard assets, emerging markets, precious metals including gold, and
other specialized asset classes.
Market Vectors exchange-traded products have been offered by Van
Eck Global since 2006 when the firm launched the nation’s first
gold mining ETF. Today, Market Vectors ETFs and ETNs span several
asset classes, including equities, municipal bonds and currency
markets.
Van Eck Global also offers mutual funds, variable insurance
products, separate accounts and alternative investments. Designed
for investors seeking innovative choices for portfolio
diversification, Van Eck Global’s investment products are often
categorized in asset classes having returns with low correlations
to those of more traditional U.S. equity and fixed income
investments.
All indices are unmanaged and include the reinvestment of all
dividends, but do not reflect the payment of transaction costs,
advisory fees or expenses that are associated with an investment in
the Fund. An index’s performance is not illustrative of the Funds
performance. Indices are not securities in which investments can be
made. Results reflect past performance and do not guarantee future
results. This performance is historical and is provided to
illustrate market trends. The DJUBS is composed of futures
contracts on 19 physical commodities. The S&P GSCI is composed
of futures contracts on 24 physical commodities, with high energy
concentration and limited diversification. Both indices buy and
sell short-term (i.e., “front month”) futures contracts. In
comparison, the UBS CMCI is composed of futures contracts on 27
physical commodities and buys and sell contracts with maturities of
three months and, for some commodities, up to three years.
UBS and Bloomberg own or exclusively license, solely or
jointly as agreed between them all proprietary rights with respect
to the Index. In no way do UBS or Bloomberg sponsor or endorse, nor
are they otherwise involved in the issuance and offering of the
Fund nor do either of them make any representation or warranty,
express or implied, to the holders of the Fund or any member of the
public regarding the advisability of investing in the Fund or
commodities generally or in futures particularly, or as to results
to be obtained from the use of the Index or from the Fund.
Risks: You can lose money by investing in the Fund. Any
investment in the Fund should be part of an overall investment
program, not a complete program. Commodities are assets that have
tangible properties, such as oil, metals, and agriculture.
Commodities and commodity-linked derivatives may be affected by
overall market movements and other factors that affect the value of
a particular industry or commodity such as weather, disease,
embargoes or political or regulatory developments. The value of a
commodity-linked derivative is generally based on price movements
of a commodity, a commodity futures contract, a commodity index or
other economic variables based on the commodity markets.
Derivatives use leverage, which may exaggerate a loss. The Fund is
subject to the risks associated with its investments in
commodity-linked derivatives, risks of investing in wholly owned
subsidiary, risk of tracking error, risks of aggressive investment
techniques, leverage risk, derivatives risks, counterparty risks,
non-diversification risk, credit risk, concentration risk and
market risk. The use of commodity-linked derivatives such as swaps,
commodity-linked structured notes and futures entails substantial
risks, including risk of loss of a significant portion of their
principal value, lack of a secondary market, increased volatility,
correlation risk, liquidity risk, interest-rate risk, market risk,
credit risk, valuation risk and tax risk. Gains and losses from
speculative positions in derivatives may be much greater than the
derivative’s cost. At any time, the risk of loss of any individual
security held by the Fund could be significantly higher than 50% of
the security’s value. Investment in commodity markets may not be
suitable for all investors. The Fund’s investment in
commodity-linked derivative instruments may subject the fund to
greater volatility than investment in traditional securities.
For a description of these and other risk considerations, please
refer to the Fund’s prospectuses, which should be read carefully
before you invest. Again, the Fund offers investors exposure to the
broad commodity markets, currently by investing in a combination of
commodity-linked structured notes and swaps. The Fund has obtained
a private letter ruling from the IRS confirming that the income
produced by certain types of structured notes constitutes
“qualifying income.”
Please call 800.826.2333 or visit vaneck.com
for performance information current to the most recent month end
and for a free prospectus and summary
prospectus. An investor should consider the Fund’s
investment objective, risks, and charges and expenses carefully
before investing. The prospectus and summary prospectus contains
this and other information. Please read it carefully before
investing.
Van Eck Securities Corporation, Distributor,
335 Madison Avenue, New York, NY 10017
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