The dry bulk shipping industry has seen the launching of its first tailor-made freight futures exchange-traded product, the Breakwave Dry Bulk Shipping ETF (BDRY).
The fund has been set up by Breakwave Advisors in partnership with ETF Managers Group (ETFMG).
Exchange-traded funds (ETFs) are used for tracking of stocks, futures and derivatives for lower fees than actively-traded funds, making them an attractive alternative for individual investors.
The fund aims to reduce the effects of rolling contracts by using a laddered strategy to buy contracts while letting existing positions expire and settle in cash, a joint press statement said. Furthermore, it is planned to progressively increase the fund’s position to the next calendar quarter three-month strip.
As informed, the BDRY provides long exposure to the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices.
In practice, this means that investors get the exposure to dry bulk freight without the need for a futures trading account.
“We are thrilled to bring such an innovative product to the market, allowing investors to participate directly in the exciting world of dry bulk shipping,” John Kartsonas, Founder and Managing Partner of Breakwave Advisors LLC, said.
“Freight futures have historically exhibited strong cyclical returns, but for most investors it has been a very hard-to-access market. For the first time, through BDRY, a wide range of market participants can now directly access the dry bulk market using a simple, transparent, equity-like investment product.”
The fund will hold freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures, based on the prevailing calendar schedule.
Capesize contracts will be the key focus of the initial freight futures of the fund reaching 50 pct share, followed by Panamax contracts with 40 pct and Supramax contracts with 10 pct, rebalancing annually.
The launching of the fund comes at a time when the dry bulk shipping is experiencing an upturn again following several years of underperformance.