Barclays rolled out 19 new commodity-based exchange-traded notes (ETNs) last Thursday (4/21/11). The 18 new Pure Beta products attempt to track the same commodities as 18 existing iPath ETNs, the primary difference being the process used by each underlying index to roll future contracts. The iPath Seasonal Natural Gas ETN (DCNG) was also introduced, although it is not part of the new Pure Beta methodology.
Barclays new Pure Beta indexes intend to provide a more representative measure of commodity market returns by reducing the negative impacts of contango. Instead of rolling futures contracts on a monthly basis, they may roll into one of a number of futures contracts with varying expiration dates.
Each index will attempt to provide the best proxy for the average price return of the front-year futures contracts for each commodity in the index, while avoiding parts of the futures curve that are subject to persistent market distortions. A new Barclays’ special report, The Basics of iPath Pure Beta Commodity ETNs (pdf), provides additional information and background on the methodology.
