LOS c: Explain why even a commodity index strategy should be considered an active investment.

Q1. Which of the following most accurately describes a reason why a commodity index strategy should be considered an active strategy?

A)   Managers choose benchmark index.

B)   Index rebalancing due to changing inflation.

C)   High turnover of contracts held.

LOS c: Explain why even a commodity index strategy should be considered an active investment. fficeffice" />

Q1. Which of the following most accurately describes a reason why a commodity index strategy should be considered an active strategy?

A)   Managers choose benchmark index.

B)   Index rebalancing due to changing inflation.

C)   High turnover of contracts held.

Correct answer is C)

Commodity index strategies require managers to frequently adjust their positions due to the need to roll over expiring commodity contracts, reweight components due to index rebalancing, and roll over collateral debt securities. Managers who correctly time these activities can add additional return.

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