Barclays ETNs access 'pure beta' commodity returns

Barclays Capital has launched a suite of commodity exchange-traded notes (ETNs) in the US, which aim to mitigate the disproportionate effects of supply and demand on commodity performance.

The 18 ETNs track Barclays' Pure Beta indices, providing exposure to single commodities, broad access to industrial and precious metals, as well as livestock and agriculture.

The notes also offer benchmark exposure to the Barclays Capital Pure Beta Series-2 TR index and the Barclays Capital Commodity Index Pure Beta TR.

Rather than tracking the front-month futures contract like most benchmark commodity indices, Barclays Capital's Pure Beta indices use a methodology that selects a futures contract which is more representative of the average price of the underlying.

"It is really about trying to reflect the market price for each commodity by applying a methodology that picks the right tenor or the right futures contract for each commodity," said Waqas Samad, head of index, portfolio and risk solutions at Barclays Capital.

"This avoids some of the short-term distortions in the market, which are driven by supply and demand factors. The methodology tries to pick futures along the curve that are most liquid but also the best representation of the market price movements at the front of the curve."

Given some of the recent world events, the interest in commodities as an asset class will continue to grow, said Kevin Burke, head of investor solutions at Barclays Capital.

He added: "There is no doubt, given the macro-economic and geo-political environment - particularly in the Middle East - that the demand for commodities from all client bases will continue."

The listing of these ETNs coincided with the first trading day for the iPath Seasonal Natural Gas ETN, which is also listed on the New York Stock Exchange.