The other five sectors covered by the index are agriculture, base/industrial metals, energy, forest products and precious metals. The sectors are weighted within the index based upon global consumption, while individual equities are weighted within those sectors by float-adjusted market capitalization.

The index family is focused on pure-play companies: Each company must derive at least 50% of its revenues from its operations in the commodity sector it falls into. However, that requirement is waived (to 25%) for companies operating in the water sector, since that tends not to be their only focus.

Not surprisingly, Van Eck, which has already launched a number of equity-based ETFs that cover companies operating in commodities sectors such as steel and coal, has a hard assets producers ETF in registration that will track an unspecified index - probably the headline Rogers Van Eck Hard Assets Producers Index. (Read the prospectus here.)

And what will this index offer investors? Well for one thing, Rogers points out, there are still an awful lot of investors who get nervous as soon as the word "commodity" is uttered. A product based on the index will offer commodities exposure through the companies that operate in that area without actually investing in the commodities themselves.

"Some people just cannot bring themselves to buy commodities for whatever reason, so this is an alternative," Rogers said.

Alternative Approach

And let's not forget the current situation: Given that the Commodity Futures Trading Commission and Senator Joseph Lieberman are taking a hard look at whether funds investing directly in commodities are driving up commodities prices and whether legislative intervention is needed, more than a few investors may be interested in an index (and by extension any product based on it) that offers exposure to commodities through equities rather than futures.

Rogers said the equities-based RVE Hard Assets Producers Index has outperformed most pure commodities indexes recently, but that it should correlate with those indexes over time - with either the futures-based indexes or the RVE index outperforming in any given time period. However, commodity-related equities tend to correlate more closely with equity markets than with commodities markets, which means investors who opt for commodity equities rather than commodity futures could be missing out on the well-documented diversification benefits of commodity futures.

According to backtested data, for the past five years, the RVE headline index was up more than 300% versus increases of about 139% for the Dow Jones-AIG Commodity Index and 77% for the S&P GSCI. Year-to-date, the RVE index was down more than 9%, while the DJ-AIGCI was up nearly 3.5% and the S&P GSCI was down a little more than 2%.

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