10-Q: abrdn Palladium ETF Soars on Strong Q2 Palladium Gains

abrdn Palladium ETF reports significant net asset growth and strong total returns for Q2 2025, driven by a substantial increase in palladium prices.

Summary

• Net Assets increased by 39.70% to $515.28 million at June 30, 2025, from $368.86 million at March 31, 2025.
• Net Assets increased by 45.54% to $515.28 million for the six months ended June 30, 2025, from $354.06 million at December 31, 2024.
• The price per ounce of palladium rose 15.01% to $1,134.00 at June 30, 2025, from $986.00 at March 31, 2025.
• The price per ounce of palladium rose 24.75% to $1,134.00 at June 30, 2025, from $909.00 at December 31, 2024.
• Shares outstanding increased to 4,987,500 at June 30, 2025, from 4,100,000 at March 31, 2025, due to 1,287,500 Shares created and 400,000 Shares redeemed in Q2 2025.
• Shares outstanding increased to 4,987,500 at June 30, 2025, from 4,262,500 at December 31, 2024, due to 1,700,000 Shares created and 975,000 Shares redeemed for the six months ended June 30, 2025.
• Net asset value per Share increased 14.83% to $103.31 in Q2 2025, from $89.97 at March 31, 2025.
• Net asset value per Share increased 24.38% to $103.31 for the six months ended June 30, 2025, from $83.06 at December 31, 2024.
• The Trust reported a net increase in net assets from operations of $61.32 million for Q2 2025, a significant improvement from a $11.21 million decrease in Q2 2024.
• The Trust reported a net increase in net assets from operations of $91.35 million for the six months ended June 30, 2025, compared to a $32.33 million decrease in the same period last year.
• Total return, net asset value, was 14.83% for Q2 2025 and 24.38% for the six months ended June 30, 2025.

Sentiment

Score: 9

Explanation: The Trust demonstrated strong financial performance driven by a significant increase in palladium prices, leading to substantial growth in net assets and total return. The operational efficiency and control effectiveness were also confirmed.

Positives

• Significant increase in net assets and net asset value per share, driven by a strong rise in palladium prices.
• Substantial unrealized gain on investment in palladium of $73.13 million for Q2 2025 and $118.51 million for the six months ended June 30, 2025.
• Positive change in net assets from operations ($61.32 million for Q2 2025 and $91.35 million for H1 2025), reversing losses from the prior year periods.
• Strong total return on net asset value of 14.83% for Q2 2025 and 24.38% for H1 2025.
• Increase in outstanding shares, indicating investor interest and creations of new Baskets.
• Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls.

Negatives

• The Trust incurred net investment losses of $582,000 for Q2 2025 and $1.10 million for H1 2025, primarily due to the Sponsors Fee.
• Realized losses on palladium distributed for the redemption of Shares were $11.10 million for Q2 2025 and $25.75 million for H1 2025.
• Realized losses on palladium transferred to pay expenses were $138,000 for Q2 2025 and $316,000 for H1 2025.

Risks

• Concentration of risk in palladium price fluctuations, as substantially all assets are holdings of palladium.
• Palladium price is affected by global supply and demand, including production, recycling, autocatalyst demand, industrial demand, jewelry demand, investment demand, and sales of existing stockpiles.
• Existing stockpiles of palladium are likely to be exhausted soon, placing a higher burden on new mine supply.
• Palladium price is influenced by investors' expectations with respect to the rate of inflation, currency exchange rates, and interest rates.
• Investment and trading activities of hedge funds and commodity funds can affect palladium prices.
• Global or regional political, economic, or financial events and situations, including tariffs, sanctions, and other restrictions on trade, can impact palladium prices.
• No assurance that palladium will maintain its long-term value in terms of purchasing power in the future.
• In the event that the price of palladium declines, the value of an investment in the Shares is expected to decline proportionately.

Future Outlook

The Trust's objective is for the Shares to reflect the performance of the price of physical palladium, less the Trust's expenses. The Sponsor believes the Shares offer a cost-effective investment relative to traditional palladium investment methods. The Trust is not under a duty to update forward-looking statements.

Management Comments

• The Trust is not managed like a corporation or an active investment vehicle. It does not have any officers, directors, or employees and is administered by the Trustee pursuant to the Trust Agreement.
• The Sponsor believes that, for many investors, the Shares will represent a cost effective investment relative to traditional means of investing in palladium.
• Neither the Trust nor the Sponsor is under a duty to update any of the forward-looking statements, to conform such statements to actual results or to reflect a change in managements expectations or predictions.
• The Trust's disclosure controls and procedures were effective as of June 30, 2025.
• There have been no changes that have materially affected, or are reasonably likely to materially affect, the Trust's or Sponsor's internal control over financial reporting.

Industry Context

The Trust's performance is directly tied to the price of physical palladium. The significant increase in net assets and total return reflects a strong upward trend in palladium prices during the reporting period. This suggests a favorable market environment for palladium, potentially driven by factors such as industrial demand (e.g., autocatalysts), investment demand, or supply constraints (e.g., exhaustion of existing stockpiles). The ETF structure provides investors with exposure to this commodity market without direct physical ownership.

Comparison to Industry Standards

• The Trust's performance is directly benchmarked against the price of physical palladium, specifically the London Bullion Market Association (LBMA) Palladium Price PM.
• The Net Asset Value (NAV) per Share rose 14.83% in Q2 2025, slightly less than the 15.01% increase in the price per ounce of palladium, primarily due to the 0.60% Sponsors Fee. This indicates effective tracking of the underlying commodity price, with the expense ratio being the primary drag.
• For the six months ended June 30, 2025, the NAV per Share increased 24.38%, compared to a 24.75% increase in the palladium price, demonstrating close tracking performance relative to its stated objective and expense structure.
• The expense ratio of 0.60% is a key factor in assessing its cost-effectiveness compared to other palladium investment vehicles or direct physical holdings, which may incur higher storage, insurance, or transaction costs.

Corporate Governance

Related Party Transactions

• The Sponsor and the Trustee are considered related parties to the Trust.
• The Sponsors Fee is paid by the Trust through in-kind transfers of palladium to the Sponsor.
• The Sponsor assumes administrative and marketing expenses, including the Trustee's fee, Custodian's fee, exchange listing fees, SEC registration fees, printing/mailing costs, audit fees, and up to $100,000 per annum in legal expenses.
• The Trustee and the Custodian and their affiliates may act as Authorized Participants and purchase or sell Shares for their own account or as agents.
• The Trustee and the Custodian and their affiliates may purchase or sell palladium directly for their own account or as agents.

Stakeholder Impact

• Shareholders experienced significant positive returns on their investment due to the increase in palladium prices and the Trust's effective tracking.
• Authorized Participants benefit from reduced Basket size (12,500 shares) and faster settlement (1 business day), improving efficiency for creation and redemption activities.
• The Sponsor (abrdn ETFs Sponsor LLC) receives increased Sponsors Fees due to the growth in the Trust's net assets.
• Custodians (ICBC Standard Bank Plc) benefit from the new custodial arrangement for the Trust's physical palladium.

Next Steps

• The Trust will continue to issue and redeem Shares in Baskets in exchange for palladium.
• The Trustee will continue to value the Trust's palladium daily based on the LBMA Palladium Price PM or AM.

Key Dates

Recommendation

The Trust's performance is directly tied to palladium prices, which have shown significant appreciation during the reporting period. The ETF structure provides efficient and cost-effective exposure to this commodity. Given the strong positive returns, the effective management of the fund (evidenced by its low expense ratio and close tracking of the underlying asset), and the positive momentum in palladium, it represents a strong buy for investors seeking exposure to palladium. This recommendation is contingent on a continued positive outlook for palladium itself, as the ETF's value is solely derived from the underlying commodity.

Keywords

Palladium, ETF, PALL, abrdn, commodity, precious metals, investment, physical palladium, market risk, financial report, Q2 2025, net asset value, investment fund