UBS AG and Bloomberg Finance L.P. have launched the UBS Bloomberg CMCI Food Index, a unique investment tool offering direct exposure to the food sector.
The UBS Bloomberg CMCI Food Index is available in US dollars, Euros and Swiss Francs and covers 13 commodities directly linked to food consumption including wheat, corn, soybeans, sugar and livestock.
Each commodity in the index is diversified across a range of different investment maturities and uses the same methodology as the UBS Bloomberg Constant Maturity Commodity Index (CMCI) which addresses common investor concerns such as volatility and roll yield.
The UBS Bloomberg CMCI Index will serve as the underlying for a variety of investment products, such as exchange-traded funds (ETFs), structured products and investment funds.
“Food prices have seen the biggest annual increase in several decades, contributing to high inflation rates in many economies, most notably China. Farm commodity prices have rallied significantly due to the growing prosperity of many developing nations as well as through increased demand from the expanding biofuel industry. In addition, recent climate effects and limitations in water and arable land have kept supply constrained. With a structural trend now developing in the market, this situation has spurred a huge interest from investors.
“Awareness of the link between commodity prices and inflation has increased significantly over the last six months, due mostly to the rise in food prices. The UBS Bloomberg CMCI Food Index was developed in response to a growing demand from investors looking to hedge against this price inflation as well as from those looking to buy food related commodities for diversification purposes,” says Morgan Metters, head of Commodity Index Structuring, UBS.