How does the Bloomberg Commodity Index (BCOM) differ from the GSCI?

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AcadiFi · Accepted Answer

The Bloomberg Commodity Index (BCOM), formerly Dow Jones-UBS Commodity Index, uses liquidity-plus-production weighting combined with strict diversification caps...

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Key methodology differences: BCOM weights each commodity using a two-thirds liquidity / one-third production formula, blending trading activity with economic importance. Caps enforce diversification — no single commodity can exceed 15% of the index, no single sector can exceed 33%, and no related-commodity group (e.g., energy or grains) can exceed 33%. These caps force energy weight down to roughly 30%, compared with nearly 60% in the GSCI.

BCOM includes 23-25 commodities with meaningful allocations to precious metals (gold ~15%), industrial metals (~16%), agriculture (~31%), energy (~30%), and livestock (~5-6%). The lighter energy tilt means BCOM exhibits lower volatility and lower correlation with oil-sensitive equities than GSCI.

Roll methodology: BCOM rolls during the 6th-10th business days each month using a different contract selection schedule that some argue produces modestly better roll outcomes.

Which to use: a risk manager at Cascade Endowment choosing a commodity benchmark would prefer BCOM for diversified exposure and lower oil concentration, while a macro trader targeting energy beta might prefer GSCI. Performance comparison: during 2014-2016 oil crash, GSCI lost approximately 60% while BCOM lost about 35%, illustrating how sector caps materially dampen drawdowns. For FRM candidates, memorize that GSCI = production-weighted, oil-heavy, higher vol; BCOM = liquidity-plus-production, diversified caps, lower vol. Both apply the same roll-yield and collateral-yield accounting to produce excess-return, spot-return, and total-return versions.

How does the Bloomberg Commodity Index (BCOM) differ from the GSCI?

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