Despite Controversy, Rogers Commodity TRAKRS Ready AT CME

November 05, 2005

Jim Rogers’ commodity index mutual funds are frozen in the Refco bankruptcy proceedings. But that’s not stopping the CME from launching its new Rogers Commodity TRAKRS. Nor should it.

It wasn't supposed to be like this.

When the Chicago Mercantile Exchange (CME) signed a deal to launch a bundled futures contract tied to the Rogers Raw Materials Index, it was supposed to be all gum-drops and roses.  After all, Jim Rogers is one of the biggest names in commodities investing, and commodities investing is hot.  Tie the two together in an easily tradable package and you should have a winner.

But then Refco imploded, and it dragged Rogers' name down with it. Two funds tied to the Rogers' index have had their assets frozen in the Refco bankruptcy, and investors can't withdraw money. Suddenly Rogers, one of the world's legendary investors, has seen his name tied to words like scandal and bankruptcy.

In a sense, it shouldn't matter.  The new CME TRAKRS are not tied to Refco or the frozen mutual funds in any way. Period.  They're simply tied to the Rogers index, which remains one of the premier commodity indexes on the market today.

And the CME isn't letting the scandal get in the way.  The exchange is moving forward with the launch on Friday, November 4, and still harbors hope for the product.  As well they should.

But it remains to be seen if the scandal will tarnish the new TRAKRS by association.

With all this going on, it felt like a good time to review the situation - to take a look at who Jim Rogers is, what's the deal with his index, and what happened at Refco.  And what are these TRAKRS, anyway?

Legendary Investor

Rogers is one of the brand-name investing legends of recent years.  He's not in the Warren Buffet and Benjamin Graham category, but he's not far behind.  He co-founded the legendary Quantum Fund with George Soros, which famously posted 30 percent returns per year for more than 30 years.  Rogers "retired" at age 37.

With his money made, Rogers set out on a series of trips around the world. Those trips convinced him that we were on the verge of a massive bull market in commodities, as a global lack of investment in commodities infrastructure ran head-long into a rapidly developing world.  He launched the Rogers Raw Materials Index to track that boom, and created a mutual fund tied to the index to capture the return.  He wrote a book titled Hot Commodities which predicted a 15-20 year bull market in commodities, and so far, it looks like he was right. 

A Global Commodities Index

The Rogers Raw Materials Index attracted quite a bit of attention because, by some measures, it was the best commodity index in the world.  As examined here, the Rogers index offers more diversified exposure to the global commodities market than competing indexes.  It covers 35 different commodities, by far the largest number, and has a relatively low weighting of energy; many of the competing indexes, such as the Goldman Sachs Commodity Index, are dominated by energy exposure.

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