10-Q: Amplify Commodity Trust Reports Q3 2024 Results: Dry Bulk and Tanker ETFs Face Market Headwinds

Amplify Commodity Trust's Q3 2024 report reveals net losses for both its Dry Bulk and Tanker Shipping ETFs, impacted by market volatility and futures contract performance.

Summary

• Amplify Commodity Trust, which operates the Breakwave Dry Bulk Shipping ETF (BDRY) and the Breakwave Tanker Shipping ETF (BWET), released its financial results for the quarter ended September 30, 2024.
• Both BDRY and BWET experienced net losses during the quarter, with BDRY reporting a net loss of $4,219,233 and BWET a net loss of $335,663.
• These losses were primarily driven by net realized losses on futures contracts and changes in unrealized gains/losses on futures contracts.
• BDRY's net asset value (NAV) per share decreased from $12.13 to $10.71, while BWET's NAV per share decreased from $16.69 to $14.85.
• The market value per share for BDRY decreased from $12.24 to $10.74, and for BWET, it decreased from $16.79 to $14.76.
• BDRY had 2,275,040 shares outstanding and BWET had 200,100 shares outstanding as of November 1, 2024.
• The report also details the funds' investment strategies, which involve tracking the performance of freight futures contracts, and the various fees and expenses associated with their operations.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the reported net losses, decreases in NAV, and the presence of significant market risks. The document highlights challenges and uncertainties in the shipping industry, leading to a pessimistic outlook.

Positives

• The funds maintain a diversified portfolio of freight futures contracts.
• The Sponsor has agreed to cover expenses exceeding 3.50% of average daily net assets, providing some cost control.
• The funds provide investors with exposure to the daily changes in the price of dry bulk and crude oil tanker freight futures.

Negatives

• Both BDRY and BWET experienced significant net losses during the quarter.
• The net asset value per share for both funds decreased substantially.
• The funds are subject to market risk and volatility in freight futures prices.
• The funds' performance is impacted by the price relationship between current and next month futures contracts, which can lead to roll yield issues.
• The funds' expenses, including management and CTA fees, can impact their ability to achieve their investment objectives.

Risks

• The funds are exposed to market risk, particularly fluctuations in freight futures prices.
• Geopolitical events, such as the Russia-Ukraine and Israel-Hamas conflicts, can significantly impact shipping routes and freight rates.
• Changes in global economic conditions and commodity demand can affect the funds' performance.
• The funds face liquidity risk, as they may not always be able to liquidate positions quickly or at desired prices.
• Natural disasters and epidemics can disrupt economies and markets, impacting the funds' investments.
• Regulatory changes in the futures markets could adversely affect the funds' operations and strategies.

Future Outlook

The report includes forward-looking statements regarding future events and financial results, but cautions that actual results may differ materially due to various factors, risks, and uncertainties. The Sponsor does not undertake any obligation to update these statements.

Management Comments

• The Sponsor, Amplify Investments LLC, manages the Trust and the Funds.
• The Sponsor has exclusive management and control of all aspects of the Trust's business.
• The Trustee has no duty or liability to supervise the performance of the Sponsor.
• The shareholders have no voice in the day-to-day management of the business and operations of the Funds and the Trust.

Industry Context

The report highlights the impact of geopolitical events on the shipping industry, including the Russia-Ukraine and Israel-Hamas conflicts. These events have caused disruptions in shipping routes and increased volatility in freight rates, affecting the performance of both dry bulk and tanker shipping ETFs. The report also notes the influence of Chinese demand on tanker rates and the overall market.

Comparison to Industry Standards

• BDRY is the only Freight futures ETF globally, making direct comparisons difficult.
• The report details the differences between the benchmark portfolio returns and the funds' NAV, which are due to factors such as settlement prices, roll methodologies, trading commissions, clearing fees, and management fees.
• The funds' performance is compared to their respective benchmark portfolios, highlighting the impact of expenses and trading practices on tracking accuracy.

Management Changes

Stakeholder Impact

• Shareholders experienced a decrease in the value of their investments due to the net losses and NAV declines.
• The Sponsor is responsible for managing the funds and covering certain expenses.
• Service providers, such as the Custodian, Administrator, and Distributor, receive fees for their services.
• Authorized Participants are able to create and redeem shares in Creation Baskets.

Next Steps

• The funds will continue to track the performance of their respective benchmark portfolios.
• The Sponsor will continue to manage the funds and cover expenses exceeding the expense caps.
• The funds will continue to monitor market conditions and adjust their strategies as needed.

Key Dates

Keywords

Dry Bulk Shipping, Tanker Shipping, Freight Futures, Commodity ETF, BDRY, BWET, Shipping Rates, Futures Contracts, Amplify Commodity Trust, Net Asset Value