We’ve been talking a lot about HSBC’s climate change index, but now Merrill Lynch is getting in on the act. It has launched not one, but two biofuel indices.
The pair are “designed to offer investors exposure to the fast-growing biofuels market with greater liquidity, transparency and efficiency than financial instruments currently available: The MLCX Biofuels Index and the MLCX Biofuels Plus Index.”
Until now, investors seeking to profit from rapid expansion in the ethanol and bio-diesel industries typically recurred to traditional agricultural commodity indices or futures. Such instruments are vulnerable to very negative roll returns, or negative carry, due to the storage dynamics of the underlying agricultural commodity markets. Merrill Lynch’s new indices use a rolling mechanism to spread the buying and selling process over 15 days. The MLCX Biofuels Index offers exposure specifically to biofuels. The MLCX Biofuels Plus Index offers exposure to biofuels and conventional fossil fuels.
You go guys…