A commodity index fund is an investment fund that tracks the performance of a commodity index, providing investors with exposure to a diversified basket of commodities without directly owning physical assets. These funds typically invest in commodity futures contracts, commodity-linked notes, or commodity company stocks to replicate index performance.

Popular commodity indexes include the Goldman Sachs Commodity Index (GSCI), Dow Jones-UBS Commodity Index, and Rogers International Commodity Index. These funds offer several advantages including diversification across multiple commodities, professional management, liquidity, and lower storage costs compared to direct commodity ownership. However, they may experience tracking error and contango effects that impact returns.

Real-world example: An investor purchases shares in a commodity index fund tracking the GSCI, gaining exposure to energy, metals, and agricultural commodities through a single investment without managing individual futures contracts.