Index intended to deliver higher risk-adjusted through "rolling mechanism". Just on time to take advantage of the annual Wealth Report buzz, Merrill Lynch has unveiled a global commodity index to give investors a reliable benchmark to measure the performance of commodities worldwide. The Merrill Lynch Commodities index eXtra, or MLCX, will feature commodity futures contracts that are selected by liquidity and weighted by the relative importance of the commodity.

"The MLCX is designed to deliver higher risk-adjusted returns than other commodity indices because of the unique contract rolling mechanism we have built in," says Francisco Blanch, Merrill's London-based head of commodities.

Less pressure

This "semicontinuous rolling mechanism" stretches the buying and selling process over a longer period, easing pressure to sell quickly and explosively. Also, the roll schedule will differ from that of other commodity indices; in July, for instance, the MLCX will sell contracts for August and buy contracts for September.

The MLCX splits its commodities into six categories: energy, grains and oilseeds, industrial metals, soft commodities, precious metals and livestock. It sets minimum and maximum allocations to each category to control risk: no sub-index can comprise more than 60% of the index or less than 3%. Energy is the largest component with a 60% share of the index; precious metals make up the smallest component with a 3.9% share.

Merrill launched the MLCX on 22 June, two days after the publication of the World Wealth Report, an annual survey of the global private-wealth market put together by Capgemini and sponsored by Merrill.

As usual, this year's installment of the Wealth Report featured sound research, useful data - and a cryptic commercial highlighting one of Merrill's wealth-market initiatives. Last year the spotlight was on conferencing and data-aggregation technologies for advisors of mid-tier millionaires. This year the emphasis was squarely on the need for U.S. investors to increase offshore investments as a hedge against stagnant home markets.

Click here to download a copy of the 2006 World Wealth Report - you may have to register first. -FWR

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