Challenges abound with the onslaught of commodity exchange traded funds (ETFs) and exchange traded notes (ETNs). The contango war will rage more fiercely than ever because JP Morgan and BNP Paribas have launched two new indexes that allow investors to invest in commodities nearly three years out on the futures curve. The "negative roll yield" has affected many returns and left investors wondering why their commodity-index based returns don’t match the bullishness of the underlying markets.

Brad Zigler for Seeking Alpha explains that the JP Morgan Commodity Curve Index (CCI) will invest 33 futures all along the futures curves instead of the first few months. By spreading across delivery months, index developers are trying to reduce the impact of a negative roll yield. The BNP Paribas Commodity Market Representative Index (CMRI) operates in a manner similar to CCI’s, but it will be made up of 25 contracts.

Tags: Commodity ETFs, ETNs