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Not All Commodity Indexes Are Alike

Compare three popular commodity indexes and learn how they measure risk and return differently.

These frequently used commodity indexes offer investors varying types of exposure to the asset class, which can impact both risk and returns. Understanding how they differ is key.

What this chart shows

The S&P GSCI Total Return and Credit Suisse indexes do not place constraints on underlying sector allocations, which can lead to higher concentration in individual commodities. Another key difference: Bloomberg and Credit Suisse rebalance regularly, while the S&P GSCI does not.

What it means for investors

Differences in how the indexes are weighted and rebalanced can cause them to perform quite differently. Those that rebalance regularly and have sector allocation constraints are less prone to over concentration, which can result in a more diversified exposure to commodities.

The three pie charts compare the components (energy, base metals, precious metals, agriculture, livestock) and list characteristics (weighting methodology, contracts used, number of individual commodities tracked, rebalancing frequency, index construction, sector weighting constraints, roll period) of three indices: Credit Suisse Commodity Benchmark, Bloomberg Commodity Total Return and S&P GSCI Total Return.

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Disclosures

A word about risk: Commodities are volatile investments and should only form a small part of a diversified portfolio. Commodities may not be suitable for all investors. Consult your financial advisor to help you determine whether a commodity investment is right for you. Investments in commodities may be affected by overall market movements, changes in interest rates, and other factors, such as weather, disease, embargoes, and international economic and political developments.

Past performance is no guarantee of future results. The index performance is presented for illustrative purposes only and does not reflect the performance of any PIMCO product.

The Bloomberg Commodity Total Return Index is an unmanaged index composed of futures contracts on 22 physical commodities. The index is designed to be a highly liquid and diversified benchmark for commodities as an asset class. The Credit Suisse Commodity Benchmark Index is an unmanaged commodity index composed of futures contracts on 30 physical commodities. The objective of the benchmark is to gain exposure to the broad commodity universe while maintaining sufficient liquidity. Commodity were chosen based on world production levels, sufficient open interest and volume of trading. The index is designed to be a highly liquid and diversified benchmark of commodities as an asset class. S&P Goldman Sachs Commodity Index Total Return (S&P GSCITR) is an unmanaged index composed of futures contracts on 25 physical commodities, designed to be a highly liquid and diversified benchmark for commodities as an asset class. The Total Return Index includes an implied T-Bill rate on the notional value of the futures contracts.

"Collateralization" generally involves backing an investment in a futures contract (or other derivative instrument) with securities that are approximately equal in value to the notional value of the futures exposure. These pledged assets are typically invested in high quality, fixed income securities.

This material has been distributed for informational purposes only and should not be considered as investment advise or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world.

PIMCO Investment LLC , distributor, 1633 Broadway, New York, NY 10019, is a comapny of PIMCO ©2016, PIMCO

CMR2016-0804-203036