The Merrill Lynch Commodity index eXtra (MLCX) is a rules-driven commodity index where commodity contracts are initially selected by liquidity and then weighted by the importance of each commodity in the global economy, with particular emphasis on downstream commodities.
MLCX Traditional Index Benefits
- Reduced Risk > Negative correlation to traditional asset classes.
- Enhanced Returns > High historical equity-like returns.
- Increased Returns >The MLCX can increase returns by staying "further out on the curve" and rolling its components semi-continuously.
- More exposure to downstream commodities > Over long periods of time, these downstream commodities tend to reflect superior spot and roll returns.
- Selection & Flexibility > Offers ER and TR indices, seven sector and single commodities indices for each commodity in the index.
Merrill Lynch is a primary liquidity provider of traditional commodity indices such as the S&P GSCI Commodity Index, the DJ-AIG Commodity Index and the Rogers International Commodity Index.
While there are various established indices in the market, Merrill Lynch believed that a new index methodology was needed to keep up with the current state of the commodity markets.