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A Dry Bulk Shipping ETF Sets Sail

ETF Professor

The wait for a dry bulk shipping exchange traded fund is over with the debut of the Breakwave Dry Bulk Shipping ETF (NYSE: BDRY) on Thursday. The Breakwave Dry Bulk Shipping ETF is the first to focus on dry bulk shipping and does so with freight shipping futures.

BDRY was launched by Breakwave Advisors, in partnership with ETF Managers Group. The new ETF holds near-dated futures contracts on various dry bulk indexes.

The methodology gives “investors exposure to dry bulk freight without the need for a futures trading account. BDRY is designed to reduce the effects of rolling contracts by using a laddered strategy to buy contracts while letting existing positions expire and settle in cash,” according to a statement issued by Breakwave Advisors.

Breakwave is a New York-based commodity trading advisor specializing in freight and shipping investments.

The volatility in shipping rates could be a potentially compelling driver of BDRY's performance, particularly because that theme is historically uncorrelated to traditional asset classes, like stocks and fixed income.

What's Inside BDRY

BDRY came to market with three holdings. The Baltic Exchange Panama T/C second-quarter 2018 contract and the Baltic Capesize Time Charter second-quarter 2018 contract combine for 92 percent of the new ETF's weight. The Baltic Exchange Supramax Average Shipping Route second-quarter 2018 contract comprises the remainder of the fund's portfolio.

BDRY's “investment objective is to provide investors with exposure to the daily change in the price of dry bulk freight futures, before expenses and liabilities of the fund, by tracking the performance of a portfolio consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes that measure rates for shipping dry bulk freight,” according to the issuer.

BDRY's annual expense ratio is 1.72 percent, or $172 on a $10,000 investment.

Improving Access

Freight futures have previously delivered solid returns, but prior to the debut of BDRY, the asset class was difficult to access for regular investors.

“Freight futures have historically exhibited strong cyclical returns, but for most investors it has been a very hard-to-access market,” said BreakWave. “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.”

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