What is the Dow Jones AIG Commodity Index (DJ-AIGCI)
The Dow Jones AIG Commodity Index (DJ-AIGCI) was a weighted index which tracks a wide range of 22 commodity futures contracts, including metals, agricultural products, energy, and livestock. Since it is a weighted index, adjustments reflect different proportions of components that make up that index.
The DJ-AIGCI is now known as the Bloomberg Commodity Index.
BREAKING DOWN Dow Jones AIG Commodity Index (DJ-AIGCI)
The Dow Jones AIG Commodity Index (DJ-AIGCI) represents indexed pricing of futures contracts. The included contracts are weighted, based on commodity production and contract liquidity. The DJ-AIFCI is rebalanced annually and has restricted weightings so that no one related group of commodities can exceed more than 33-percent of the index. Also, no one commodity can represent more than 15-percent of the index.
The index provides a broad view of price trends in a diverse set of commodities as a resource for investors. They may use the index to diversify their portfolios by allocating assets to commodities. The Dow Jones AIG Commodity Index is also the reference index for exchange-traded notes (ETNs).
ETNs resemble exchange-traded funds (ETFs), but instead of holding specific assets, they are unsecured debt securities issued by an underwriting bank. The terms of the note specify payment on the note's maturity, based on the performance of benchmark index it tracks. All ETNs carry the risk that the issuer’s credit rating may be downgraded. However, the expense ratios of exchange-traded notes are usually relatively low. The notes offer high accuracy in tracking indices they benchmark and can be sold short for speculative or hedging purposes.
Investing in the Dow Jones AIG Commodity Index
Although this index tracks overall commodity prices, it is now part of an entire family of Bloomberg commodity indices which track broad groups, such as agricultural and metals, single commodities, forward prices across various time frames, and spot prices.
While investors cannot buy or sell an index they may trade the index through exchange traded notes (ETN) which are available on major stock exchanges. Because Bloomberg calculates and distributes this index every 15 seconds during trading hours, ETNs can track this index so that investors can participate in its movement.
One ETN which tracks the Bloomberg Commodity Index is the Barclays iPath® Bloomberg Commodity Index Total Return (DJP) which trades on the NYSE Arca exchange.
A Short History of the DJ-AIGCI
This index was created by American International Group, Inc.(AIG) to meet the growing demand for distinct indexes which improve accuracy in tracking alternative assets, other than stocks and bonds. It was introduced in 1998 in partnership with Dow Jones & Company and at first, reported on 19 commodities.
In 2009, Swiss banking firm UBS Group AG acquired the index from AIG, and the index name changed to the Dow Jones-UBS Commodity Index. Then in 2014, UBS terminated its agreement with Dow Jones and partnered with Bloomberg to manage and publish the index under its current name, the Bloomberg Commodity Index.