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Commodity Index Funds: Beyond the Rebalance

Every year around December, those of us in #coffee (and in the commodity industry in general) start talking about “the rebalance.” While the #rebalance can be particularly impactful, especially when one #commodity vastly diverges from the pack, #IndexFunds in general represent a major source of cash flow in coffee and other commodity markets. As such a significant force, it is important for us to understand how they work, and what impact they can have.

Aside from the annual rebalance, Index funds also impact the markets throughout the year via capital flows. In this article, we will examine why index funds are not always so popular, what an index fund is, how they influence commodity markets, and how to think about the rebalance.