From HardAssetsInvestor.com: Morningstar has produced indexes for stocks and bonds for a long time. Recently, it introduced indexes for the options market. And last week, it brought out a new line of commodity indexes.
The launch of the commodity indexes must be seen as a "coming of age" moment for commodities among the individual investor set. Once the domain of institutional investors, commodities have been democratized by the launch of exchange-traded funds and other low-cost access vehicles, and now have become part of the broader investing discussion. If Morningstar has set its sights on an asset class, it must clearly be hearing about it from its constituents.
Interestingly, the Morningstar Commodity Indexes take a different approach from most popular commodity futures indexes, in that they come in five unique flavors: long only, short only, long/short, long/flat and short/flat. The long- and short-only indexes are exactly what they sound like: they take long and short positions, respectively, in each of the 20 commodities that are included in the indexes. The short index is the first major index to track the performance of a short strategy in the commodities market.
The other indexes, however, are more strategic, reflecting different ways that commodity investors play the commodities futures market. The long/short index uses a momentum rule to determine on a monthly basis if it will hold long, short or flat positions in each commodity. The long/flat index doesn't go short, while the short/flat index doesn't go long. Each represents a different approach to the market.
"A combination of long and short positions can allow investors to take advantage of the momentum that commodity futures prices often exhibit
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