Shipping ETF finds favourable winds

Jun 11th, 2021 | By | Category: Alternatives / Multi-Asset

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A niche ETF providing exposure to dry bulk shipping futures has had the wind firmly in its sails this year, notching up an unbeaten return of 192% as of the end of May, according to data from global ETF analytics platform Trackinsight.

Dry Bulk Shipping ETF

The Breakwave Dry Bulk Shipping ETF has returned 192% year-to-date, as of the end of May.

The Breakwave Dry Bulk Shipping ETF (BDRY US) has left all other ETFs trailing in its wake with the second-highest-performing ETF – the Invesco Dynamic Energy Exploration & Production ETF (PXE US) – returning 67.6%.

Dry bulk shipping futures reflect the cost of transporting major hard commodities such as iron ore, coal, and grain, as well as other commodities such as bauxite and phosphate, minerals, fertilizers, and forestry products.

The ETF, which comes with a punchy expense ratio of 3.32%, invests in a mix of one- to six-month freight futures while targeting a weighted average maturity of approximately three months.

The cost of shipping has skyrocketed this year due to a combination of factors including soaring global demand for commodities, increasing market volatility, saturated ports, and an undersupply of ships.

Despite the ETF’s incredible performance, the fund has only seen modest inflows of $38 million year-to-date, perhaps indicating that the strategy is simply not on many investors’ sonar.

While the dry bulk shipping ETF has blown the competition out of the water, several other ETFs have also delivered strong returns, most notably in the traditional energy sector. Trackinsight notes that eight of the top ten best performing ETFs globally invest in the oil and gas sector and all have delivered more than 50% year-to-date.

After a disastrous 2020, the energy sector is benefitting from increased oil demand as the global economy gradually reopens. With oil prices back up around $70, many producers are finding themselves comfortably in a profitable position again.

Turning to flows, Trackinsight notes that gold ETFs reversed three months of negative flows to pick up $3.3bn in net new assets in May. The renewed interest in gold reflects investors’ desire to batten down the hatches from the threat of rising inflation looming on the horizon.

Silver ETFs also added $515m net new assets in May, bringing total AUM within these funds to an all-time record of $27bn.

Spooked by ongoing volatility and increasingly hostile rhetoric from politicians and regulators, some investors abandoned ship on their bitcoin ETPs with a net $150m redeemed from these products in May, marking the first month of outflows since June 2020. Negative flows, coupled with price crashes in bitcoin, have seen assets in the nascent sector shrink from $6.6bn in May to $4.1bn in June.

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