10-Q: Amplify Commodity Trust Reports Positive Q3 Results Driven by Freight Futures Market

Amplify Commodity Trust's Q3 2024 results show gains in both dry bulk and tanker shipping ETFs, driven by freight futures market performance and strategic fund management.

Summary

• Amplify Commodity Trust's quarterly report covers the period ended March 31, 2024, and includes financial statements for both the Breakwave Dry Bulk Shipping ETF (BDRY) and the Breakwave Tanker Shipping ETF (BWET).
• BDRY's investment objective is to provide exposure to the daily change in the price of dry bulk freight futures, tracking a portfolio of futures contracts on specified indexes that measure rates for shipping dry bulk freight.
• BWET aims to provide exposure to the daily change in the price of crude oil tanker freight futures, tracking a portfolio consisting of futures contracts on specified indexes that measure prices for shipping crude oil.
• For the three months ended March 31, 2024, BDRY's net income was $8,558,136, while BWET's net income was $831,632.
• For the nine months ended March 31, 2024, BDRY's net income was $54,603,987, while BWET experienced a net loss of $5,813.
• The report details the composition of the Benchmark Portfolios for both ETFs, including the specific futures contracts held and their market values.
• The report also discusses the various agreements in place, including management fees, CTA fees, and expense caps for both funds.
• The report outlines the risks associated with investing in these ETFs, including market risk, liquidity risk, and risks related to natural disasters and epidemics.
• The report includes certifications from the Principal Executive Officer and Principal Financial Officer regarding the accuracy and compliance of the information presented.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the strong performance of BDRY and the positive, albeit smaller, gains in BWET. However, the presence of risks and the net loss for BWET over the nine-month period temper the overall sentiment.

Positives

• BDRY showed significant net income and NAV per share growth for both the three and nine months ended March 31, 2024.
• BWET showed positive net income and NAV per share growth for the three months ended March 31, 2024.
• The Sponsor has agreed to cap fund expenses for both BDRY and BWET at an annual rate of 3.50%, excluding certain expenses, through March 31, 2025.
• The report includes certifications from the Principal Executive Officer and Principal Financial Officer regarding the accuracy and compliance of the information presented.

Negatives

• BWET experienced a net loss and NAV per share decrease for the nine months ended March 31, 2024.
• The Funds are subject to market risk, liquidity risk, and risks related to natural disasters and epidemics, which could negatively impact performance.

Risks

• The NAV of BDRY and BWET shares relates directly to the value of the futures investments held by each Fund which are materially impacted by fluctuations in changes in spot charter rates.
• Charter rates for dry bulk vessels and crude oil tankers are volatile and have declined significantly since their historic highs and may remain at low levels or decrease further in the future.
• The Russia-Ukraine war poses an increasing risk for global economic growth.
• Major economic sanctions against Russia are having a considerable impact on oil and gas prices, given the dependence of the EU on oil and gas exports out of Russia combined with limited spare capacity of such commodities globally.
• Most recently, Hamas attacked Israel, with Israel then declaring war on Hamas in the Gaza Strip.
• This conflict has stoked fears of oil supply instability in the Middle East and globally.
• In certain circumstances, such as the disruption of the orderly markets for the futures contracts or Financial Instruments in which the Fund invest, the Funds might not be able to dispose of certain holdings quickly or at prices that represent what the market value may have been in an orderly market.

Future Outlook

Expectations were for a strong freight market for the remainder of the year, as the supply disruptions are expected to remain in place while demand for iron ore and coal exceeded expectations during the three months ended March 31, 2024, when demand is typically at the lowest point of any given year, thus improving the overall sentiment for the sector.

Industry Context

The broader shipping sector has seen significant disruptions due to reducing sailing through the world's two most important waterways, namely the Panama Canal and the Suez Canal.

Comparison to Industry Standards

• BDRY is the only Freight futures ETF globally, making direct comparison challenging.
• BWET competes with other commodity ETFs, but its focus on tanker freight futures provides a unique exposure.

Stakeholder Impact

• Shareholders: The performance of the ETFs directly impacts shareholder returns.
• Authorized Participants: The transaction fees and redemption processes affect authorized participants.
• Service Providers: The contractual obligations with the Sponsor, Custodian, and other service providers ensure the smooth operation of the Funds.

Key Dates

Keywords

Breakwave Dry Bulk Shipping ETF, Breakwave Tanker Shipping ETF, Freight Futures, Commodity Pool, Shipping Rates, BDRY, BWET, Amplify Commodity Trust, ETF