Commodity Index Returns
Commodity Index Performance at Vista Basket Inception Date 4/30/2009 = 1000
Vista = Vista Commodity Basket
S&P GSCI ER = S&P GSCI Excess Return Commodity Index
BCOM ER = Bloomberg Excess Return Commodity Index
Data Sources: Bloomberg.com, SPGlobal.com, Barchart.com.
The GSCI and Bloomberg have, due to performance and other shortcomings, many index variations (especially the GSCI) while only the basic and original "total return" versions are called "headline indexes" and usually quoted in the press.
As such, total return indexes are NOT pure commodity indexes. Total returns include the implied Treasury Bill interest received from the cash typically held as collateral in a commodity account. In some years, the TBill interest earned and counted as index return is greater than the return from the component futures contracts--in my view, how odd to include interest in commodity returns.
Both the GSCI and Bloomberg have "excess return" indexes too. These are the same as total return indexes but without the interest, just the futures returns which is what the Vista basket contains. The Vista basket contains and counts only returns from holding futures contracts. Vista beats both the total and excess return indexes.
Aside from this and other issues, the Vista basket has a simplicity that is not found in any other major commodity indexes. FYI, I created the 15 component Vista Basket on 4/30/2009. The Vista Basket was created when I left Longview Funds Management, so I would not infringe on the Longview Commodity Index, which I created in May 2004. As early as the 1990s, I traded the CRB commodity index futures.
If you want buy the Vista basket, it's an easy thing to do. The basket contains one contract of fifteen selected commodity futures. The basket buys and holds the December or nearest or shoulder month, if Dec is the peak month. All fifteen are rolled over on the last trading day of September! And that's it.
Due to the selection criteria there is very little or no contract changes and no quantity changes either. This is the only conmodity trading method I know of that can tell you exactly what you own on any day of any year, past or present. It is a completely rules based mechanical system and, oddly enough, outperforms not just other passive indexes but in practice most actively managed commodity accounts, as well. (During our active years VistaCTA won numerous Barclay Hedge Top Ten CTA awards, including a 2010 Top Ten CTA of the Year award.)
Commodities, by some definitions, are ALL actively managed -- not so. Here for the first time in my blog is my Vista commodity basket (as of yesterday's close on October 3rd 2023):
Go long one contract of each and pay cash*, not exchange minimum.
Hold these long dated contracts until the last trading day of September 2024 and roll** them all on the close into same name/next year contracts. Paying cash means you never have a margin call, ever. You set it and forget it.
That's it. Nothing more, nothing less. Happy trading!
*How do you pay cash for commodity futures? Example: you buy one Dec 24 crude oil contract for $88.00 a barrel. Notional value = 1000 bbls. X $88.00 = $88,000.00. Suppose the margin requirement is only $8000 per contract. Posting minimum margin means a 10% or $8 move to $80 wipes you out. Posting the full notional value, $88,000.00 means you will never be wiped out (unless it goes negative, aha!).
The cash value of a full size contract basket is, today, roughly $1MM. Now you can and will earn tbill interest on your mil but I don't count that. Its gravy.
**What about rolls? If there is contango your new basket will cost more than the old. Do you need to add funds? In practice we don't. The difference is usually not material and always way above requirements. Also, it is usually balanced out by the occasional backwardation where the new basket is less than the old.
***The methodology for the Vista Basket composition is rules based, somewhat complicated and my former CTA's pitchbook is available upon request.