Barclays Capital, the investment banking division of Barclays Bank PLC, has launched the Commodities Out-Performance Roll Adjusted Liquid Strategy Index (CORALS Index), an index designed to capture alpha from the commodity markets.
Growth in the commodity markets, as demonstrated by the significant increases in both futures volumes and AUMs, has generated unprecedented market interest. Demand has been fuelled by rapid economic expansion in emerging economies driven by aggressive urbanisation and industrialisation.
In parallel the consumption needs of developed countries have been relentless. Supply is lagging behind as producers are struggling to keep up with demand growth due to numerous constraints, including reserve base exhaustion, labour and equipment shortages and escalating costs. These fundamental factors have driven commodity prices to new highs, generating returns of more than 16% per annum since the start of 2002.
The CORALS Index provides an opportunity to participate in a rapidly growing market that captures performance by allocating to individual commodities based on in depth analysis of fundamental and technical factors; extract positive returns in differing market cycles including stagnant or falling markets utilising a long-short strategy; diversify – the power of diversification is achieved through investing in 12 liquid commodities to benefit from low correlation within the commodity asset class and to exploit the lack of correlation with equities and bonds
Protect purchasing power by investing in commodities that are the prime contributor to inflation; and perform in crisis – the index on a historical back tested basis, has successfully weathered weak equity and bond markets.
“We designed the CORALS Index to capture alpha from the commodity markets through in-depth analysis of fundamental and technical factors,” says Shachi Shah, head of the Fund Solutions, Barclays Capital.
“The price appreciation that the Commodity markets has seen is based on strong fundamental factors such as, rapid growth in emerging economies and sustained demand from developed countries versus the numerous constraints that continue to hamper supply growth. Consequently, commodity prices will continue to face upward pressure,” adds Kevin Norrish, director of Commodities Research, Barclays Capital.
Barclays Capital will provide data, analytics and support for these indices via web based and other e-commerce protocols. The indices are available on Barclays Capitals index website