Note: Beginning with the November 2006 roll date, the NYMEX Gasoline Futures contract will be replaced by the NYMEX Reformulated Gasoline Blendstock for Oxygen Blending Futures contract.
The Standard & Poor's Diversified Trends Indicator (S&P DTI) is an investable long/short strategy that can benefit from trends (in either direction) in the global futures markets. It consists of 24 futures contracts, with a 50% weighting in financial futures (e.g., interest rates and currencies) and 50% weighting in commodities futures (softs, energy, metals, etc.). Standard & Poor's also offers financials-only and commodities-only subsets of the S&P DTI, providing a flexible way to tailor exposure to these respective asset classes.
Why S&P DTI?
Sophisticated investors have long recognized the value of diversification, an objective that is increasingly achieved by adding non-traditional asset classes to a portfolio. To that aim, some investors have looked to physical commodity and financial futures investing, but this requires a great deal of skill and often entails substantial risk. With the S&P DTI and its financials-only and commodities-only subsets, investors have several flexible ways to diversify a traditional portfolio with a strategy that can benefit from both long and short positions.
Prices of financial and commodity futures contracts as well as their underlying components tend to be cyclical in nature. Each of the 14 sectors in the composite S&P DTI (with the exception of the Energy sector*) gets positioned each month either long or short based on its price behavior relative to its moving average. This long/short design provides the opportunity for the S&P DTI to capture profits in both up and down markets. The S&P DTI and the two sub-indicators are rebalanced monthly by sector, and the specific futures contracts for each component are determined annually.
Measures trends and volatility The S&P DTI is a long/short indicator designed to measure trends in the commodity and financial futures markets. Additionally, it measures the volatility of an aggregate of major commodity, interest rate, and currency price movements.
Captures Inflation on the Long Side Many investors consider commodity and financial futures markets useful to offset inflation risk in portfolios. In markets with rising prices, the S&P DTI is typically long those futures contracts and therefore can reflect the impact of those markets on inflation over extended periods.
Profits from Futures Cyclicality on the Short Side Since commodities, interest rates, and currencies tend to move in extended trends, simple "long only" ownership of futures could result in extended and significant drops in value. The S&P DTI mitigates the "long only" risk by shorting futures contracts that show falling price trends.
Long/Short Creates a Low Volatility Indicator The S&P DTI, with its long/short nature, creates a smooth and relatively low volatility return compared to stocks and bonds, earning the risk transfer premia that is present in the futures market.
Financials and Commodities Sub-indicators: Customized Exposure to the Futures Market
The S&P DTI Financials and Commodities sub-indicators offer a flexible way to tailor exposure to these respective asset classes.
*Energy, due to the significant level of its continuous consumption, limited reserves and oil cartel controls, is subject to rapid price increases in the event of perceived or actual shortages. Because no other sector is subject to the same continuous supply and concentration risk, the Energy sector is never positioned short in the S&P Diversified Trends Indicator methodology.
Disclaimer:
Standard & Poor's does not sponsor, endorse, sell or promote any investment fund or other vehicle that is offered by third parties and that seeks to provide an investment return based on the returns of the S&P Diversified Trends Indicator. A decision to invest in any such investment fund or other vehicle should not be made in reliance on any of the statements set forth in this document. Prospective investors are advised to make an investment in any such fund or vehicle only after carefully considering the risks associated with investing in futures contracts, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or vehicle. Standard & Poor's does not guarantee the accuracy of these pro forma indicator returns or other data or information contained herein and does not recommend any investment or other decision based on their results. Pro forma returns do not take into account transaction costs or certain fees. If the foregoing had been factored in, the pro forma returns would have been lower. Past performance is not necessarily indicative of future returns.
The information contained on this site is provided on an "as is" basis. Neither Standard & Poor's, its affiliates nor any other party involved in the making or compiling of the information guarantees the accuracy and/or the completeness of any of this information. Neither Standard & Poor's, its affiliates nor any other party involved in the making or compiling of the information makes any representation or warranty, express or implied, as to the results to be obtained by any person or entity from any use of this information, and the user of this information assumes the entire risk of any use made of this information. Neither Standard & Poor's, its affiliates nor any other party involved in the making or compiling of the information makes any express or implied warranties, and Standard & Poor's, its affiliates and any other party involved in the making or compiling of the information hereby expressly disclaim all warranties of merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall Standard & Poor's, its affiliates or any other party involved in the making or compiling of the information have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
