Deutsche Bank Launches First Commodity-Index-Linked Fund Traded on a US Securities Exchange

DB Commodity Index Tracking Fund (DBC) returns are expected to track the performance of the Deutsche Bank Liquid Commodity Index (DBLCI). The DBLCI is a rules-based index, comprised of Crude Oil, Heating Oil, Gold, Aluminum, Corn and Wheat. The DBLCI is calculated based on six liquid futures contracts on the commodities comprising the Index. DBC also will generate interest on cash invested in the tracking fund.

Interesting that it’s based on only six contracts. It’s nice to have a commodity index-based ETF available, and I’ll be watching to see how liquid it is. Launching this ETF after the run commodities have made in recent years reminds me that “when the ducks quack, Wall Street feeds ‘em.”.

You can download the prospectus here (111 pages). Table of Index Weights

Looking through their promotional brochure I see that they’re pretty shameless about touting the DBLCI’s recent performance, though they’re quick to add “past performance should not be taken as an indication of future performance.” If they were honest, they would print the table of closing levels for the Index all the way back to 1989 right up front.

For example, the closing level in 1990 was 162.39 and in 2001 was 176.01 for a whopping return of about 8% (I’m doing it in my head) over all those years… and that’s not even considering the fees and taxes that the fund would have generated over that time.

Uncle Morty taught me the value of always reading the fine print. When someone’s trying to sell you something, take your time, ask a ton of questions, and always think: who’s making money here and how are they making it?

When my Mom bought her first fund long ago she asked the saleswoman: “How do you get paid?” The saleswoman answered: “Don’t you worry about how I get paid.” (I still get furious when I think about this exchange.) If it had been a salesman he probably would have said: “Don’t you worry your pretty little head about how I get paid.” The lesson is you should always worry your pretty little head about how (and how much) the other guy gets paid.