Components, Weights, Index Levels and Construction
Total Return, Excess Returns and Spot Indices
The S&P GSCI™ Total Return index measures a fully collateralized commodity futures investment that is rolled forward from the fifth to the ninth business day of each month. Currently the S&P GSCI™ includes 242 commodity nearby futures contracts. The S&P GSCI™ Total Return is significantly different than the return from buying physical commodities.
The S&P GSCI™ Spot index tracks the price of the nearby futures contracts, not returns available to investors. At the end of every business day, the S&P GSCI™ is composed of the same proportions by weight of the underlying commodities and expirations as the portfolio represented by the S&P GSCI™ Excess Returns.
Most important, the S&P GSCI™ Spot index cannot be compared directly with the S&P GSCI™ Total Return index, either conceptually or with a single mathematical operation.
On the first point, you CANNOT add T-bills to the spot return in order to draw a comparison with the S&P GSCI™ Total Return. In fact there is nothing you can do to make a direct comparison between the Spot and Total Return indices because they are measuring two very different kinds of investments.
Meanwhile, the S&P GSCI™ Excess Return measures the return from investing in nearby S&P GSCI™ futures and rolling them forward each month (on the fifth to ninth business days of each month), always keeping your investment in nearby futures. This is a leveraged futures investment. The S&P GSCI™ Excess Return (unlike the S&P Excess Return ) is NOT the return above cash. The S&P GSCI™ Excess Return cannot be compared directly to the S&P GSCI™ Total Return, either. The S&P GSCI™ Excess Return plus T-bills does not equal the S&P GSCI™ Total Return because it ignores the impact of the re-investment of T-bill collateral yield gains back into commodity futures, and gains (losses) from commodity futures back into (out of) T-bills.
2 As the GSCI transitioned from including Unleaded Gasoline to including RBOB Gasoline, the GSCI contained 25 commodities, 7 of which were in the energy sector. This transition period lasted from the August 2006 roll through the October 2006 roll.