DEFINITION of 'S&P GSCI '

The S&P GSCI is a composite index of commodity sector returns which represents a broadly diversified, unleveraged, long-only position in commodity futures. The S&P GSCI is intended to provide exposure to broad-based commodities. The S&P GSCI was previously known as the Goldman Sachs Commodity Index (GSCI) but was purchased by Standard & Poor’s from Goldman Sachs in 2007.

BREAKING DOWN 'S&P GSCI '

The S&P GSCI is made up of 24 exchange-traded futures contracts that cover physical commodities spanning five sectors. The sectors in the 2018 composition are energy, industrial metals, precious metals, agriculture and livestock. This sector mix has been consistent over the years, but the weighting shifts year to year.

S&P GSCI Methodology and Composition

The methodology of the S&P GSCI was left unchanged when Standard and Poor’s took over the index. The index's components qualify for inclusion in the index based on liquidity measures and are weighted in relation to their global production levels - a characteristic which helps make the GSCI valuable as both an economic indicator and a commodities market benchmark. Below is a table of the 2018 reference percentage dollar weights (RPDW) for the S&P GSCI.

Commodity

2018 RPDW

Chicago Wheat

3.03%

Kansas Wheat

1.12%

Corn

4.98%

Soybeans

3.66%

Coffee

1.01%

Sugar

2.49%

Cocoa

0.36%

Cotton

1.59%

Live Cattle

2.22%

Feeder Cattle

4.06%

Lean Hogs

1.25%

WTI Crude Oil

24.70%

Brent Crude Oil

3.88%

Gas Oil

4.58%

Heating Oil

16.89%

RBOB Gasoline

4.63%

Natural Gas

3.90%

Aluminum

3.63%

LME Copper

4.43%

Lead

0.68%

Nickel

0.87%

Zinc

1.30%

Gold

4.21%

Silver

0.52%

By sector, energy makes up 58.5% of the average, with agriculture next at 18.25%, livestock at 7.53%, Industrial metals at 10.91% and precious metals at 4.73%. This mix is re-evaluated and rebalanced on an annual basis. For example, energy commodities increased their share of the index by 2.4% over 2017.

Investing in the S&P GSCI and Similar Indices

The S&P GSCI is designed to be investable and there are ETF products designed to track its performance. The S&P GSCI captures global inflation of core commodities, making it ideal for funds to track in order to create products that have low correlations with traditional asset classes. Other widely watched and traded commodity indexes include the Credit Suisse Commodity Benchmark Index and the Bloomberg Commodity Total Return Index. It is important to understand how these indexes are weighted and the frequency of rebalancing as these differences will affect the performance of tracking products differently over time.

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