10-Q: Commodity Funds Post Strong Gains Amid Market Rally

United States Commodity Index Funds Trust reports significant asset growth and net income increases for its USCI and CPER funds, driven by strong commodity market performance.

Summary

• The United States Commodity Index Funds Trust reported total assets of $457,786,816 as of June 30, 2025, an increase from $334,931,201 at December 31, 2024.
• Combined net income for the Trust for the six months ended June 30, 2025, was $56,067,661, a substantial increase from $32,180,378 for the same period in 2024.
• The United States Commodity Index Fund (USCI) saw its Net Asset Value (NAV) per share rise to $73.26 at June 30, 2025, from $66.04 at December 31, 2024, representing a 10.93% total return for the six-month period.
• USCI's total income for the six months ended June 30, 2025, was $22,813,774, up from $17,632,448 in the prior year period.
• The United States Copper Index Fund (CPER) experienced a significant increase in its NAV per share to $31.46 at June 30, 2025, from $25.23 at December 31, 2024, achieving a 24.69% total return for the six-month period.
• CPER's total income for the six months ended June 30, 2025, was $35,125,293, up from $16,395,072 in the prior year period.
• The SummerHaven Dynamic Commodity Index Total ReturnSM (SDCI), USCI's benchmark, increased by approximately 11.64% for the six months ended June 30, 2025.
• The SummerHaven Copper Index Total ReturnSM (SCI), CPER's benchmark, surged by approximately 25.39% for the six months ended June 30, 2025.
• USCI's actual total return underperformed its benchmark (SDCI) by 0.71% for the six months ended June 30, 2025, compared to 0.66% underperformance in the prior year.
• CPER's actual total return underperformed its benchmark (SCI) by 0.70% for the six months ended June 30, 2025, compared to 0.58% underperformance in the prior year.
• Total outstanding shares for the Trust increased to 10,150,000 as of June 30, 2025, from 8,550,000 at December 31, 2024.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance for both USCI and CPER, driven by robust commodity market rallies. While there are minor tracking errors and some increased expenses, the overall growth in assets, income, and total returns is highly positive. The identified risks are inherent to commodity investments and are well-disclosed, with no new material adverse changes in risk factors beyond general economic and regulatory uncertainties. The legal proceedings are largely historical or related to a different fund (USO), not directly impacting the current operational health of USCI/CPER.

Positives

• Both USCI and CPER demonstrated strong total returns for the six months ended June 30, 2025, with USCI at 10.93% and CPER at 24.69%.
• Net income for both funds significantly increased year-over-year, with USCI's net income rising to $21.68 million and CPER's to $34.38 million.
• Total assets under management grew substantially for both funds, reflecting increased investor interest and market appreciation.
• CPER's total expenses decreased for the six months ended June 30, 2025, compared to the prior year, primarily due to lower reporting and professional fees.
• CPER's brokerage commissions decreased due to a lower number of contracts held and traded.
• The Trust's disclosure controls and procedures were evaluated as effective as of June 30, 2025.

Negatives

• USCI's total expenses increased for the six months ended June 30, 2025, primarily due to higher management fees and brokerage commissions.
• The annualized yield on short-term investments (cash, cash equivalents, Treasuries) decreased for both USCI (from 5.24% to 4.24%) and CPER (from 5.27% to 4.24%) compared to the prior year period.
• Both USCI and CPER slightly underperformed their respective benchmarks (SDCI and SCI) for the six-month period, with tracking errors of 0.71% and 0.70% respectively.
• USCI experienced a change from an unrealized gain to an unrealized loss on open commodity futures contracts for the six months ended June 30, 2025, compared to the prior year.

Risks

• Market risk, including commodity price risk, volatility due to geopolitical conflicts (Russia-Ukraine war, Middle East conflicts), tariffs, trade barriers, trade wars, global/local recessions, and acts of terrorism.
• Credit risk from counterparty non-performance in futures contracts and OTC swaps, and the risk of financial failure by clearing brokers or the Trust's custodian.
• Interest rate risk, where changes in interest rates can cause fixed income securities and other investments to fluctuate in value, potentially leading to losses.
• Inflation risk, as increasing inflation can erode the value of cash and bond investments.
• Risk of loss from investments in government money market funds, as they are not guaranteed by the FDIC and their share price can fall below $1.00.
• Regulatory risks, including exchange accountability levels, position limits, price fluctuation limits, federal position limits, and evolving margin and clearing rules for swaps.
• Illiquidity risk in commodity markets due to daily price limits, which could prevent prompt liquidation of positions.
• Tracking error risk, caused by factors such as executing trades at prices other than closing settlement prices, the impact of expenses versus income, holding non-benchmark contracts, and the inability to perfectly match fractional contract ownership of the benchmark.

Future Outlook

The Trust anticipates that interest rates may continue to increase over the near future from historical lows, and that fees and expenses paid by each Trust Series may continue to be lower than interest earned, potentially leading to outperformance against their benchmarks. However, the overall short-term and long-term impact of tariffs on commodity prices is difficult to forecast, and prices may come under pressure during periods of contraction and/or economic uncertainty.

Management Comments

• USCF believes that market arbitrage opportunities will cause the daily changes in USCI's and CPER's share prices on the NYSE Arca to closely track their respective per share NAVs.
• USCF believes that the net effect of this expected relationship and the expected relationship between the per share NAV and the Applicable Index will be that the daily changes in the price of shares on the NYSE Arca will closely track the daily changes in the Applicable Index, less expenses.
• USCF anticipates that interest rates may continue to increase over the near future from historical lows. It is anticipated that fees and expenses paid by each Trust Series may continue to be lower than interest earned by each Trust Series. As such, USCF anticipates that each Trust Series could possibly outperform its benchmark so long as interest earned is higher than the fees and expenses paid by each Trust Series.

Industry Context

The commodity markets experienced broad price increases during the six months ended June 30, 2025, with the SummerHaven Dynamic Commodity Index (SDCI) up 11.64% and the SummerHaven Copper Index (SCI) up 25.39%. This rally follows a period of significant gains since the COVID-19 pandemic, with commodities historically acting as a hedge against inflation. Recent announcements of tariffs by the Trump administration have introduced uncertainty, increasing the risk of a global economic slowdown and potentially impacting commodity demand, though specific commodity prices will also be driven by idiosyncratic supply and demand factors. Copper prices, in particular, reached an all-time high in March 2025 due to undersupply forecasts and tariff anticipation, with further spikes in July 2025 following targeted tariffs. The Russia-Ukraine war has had limited direct impact on copper supply, which is more affected by mining disruptions in South America.

Comparison to Industry Standards

• The SummerHaven Dynamic Commodity Index (SDCI) Total Return of 11.64% for the six months ended June 30, 2025, significantly outperformed the S&P GSCI Commodity Index Total Return (1.94%), Bloomberg Commodity Index Total Return (5.53%), and Deutsche Bank Liquid Commodity Index-Optimum Yield Total ReturnTM (2.65%) over the same period.
• Over a longer historical period (December 31, 1997, to June 30, 2025), the SDCI TR showed an average annualized return of 11.36% and an Annualized Sharpe Ratio of 0.59, outperforming S&P GSCI TR (3.63% return, 0.09 Sharpe), BCOM TR (4.16% return, 0.08 Sharpe), and DB LCI OY TR (7.58% return, 0.28 Sharpe).
• The SummerHaven Copper Index (SCI) Total Return of 25.39% for the six months ended June 30, 2025, slightly outperformed the Bloomberg Copper Subindex Total Return (24.92%) over the same period.
• Historically (December 31, 1997, to June 30, 2025), the SCI TR demonstrated an average annualized return of 18.55% and an Annualized Sharpe Ratio of 0.65, outperforming the Bloomberg Copper Subindex Total Return (16.56% return, 0.56 Sharpe) and spot copper prices less storage cost (9.81% return, 0.31 Sharpe).

Legal Proceedings

• Optimum Strategies Action: A class action filed against USO and USCF in April 2022, alleging violations of the Securities Exchange Act of 1934 and Connecticut Uniform Securities Act. The court granted the motion to dismiss with prejudice in March 2023, and the state law claim was dismissed without prejudice.
• Settlement of SEC and CFTC Investigations: USCF and USO reached a resolution with the SEC and CFTC in November 2021, resulting in cease-and-desist orders and civil monetary penalties totaling $2,500,000 for alleged violations related to disclosures during extraordinary market conditions in 2020.
• In re: United States Oil Fund, LP Securities Litigation: A consolidated putative class action filed against USCF, USO, and individuals, alleging violations of the 1933 Act and Exchange Act related to disclosures during the 2020 oil market turmoil. The defendants intend to vigorously contest these claims, and proceedings are pending dismissal motions.
• Wang Class Action: A putative class action filed in July 2020 against USO, USCF, and others, alleging federal securities claims under the 1933 Act. This action was voluntarily dismissed in August 2020.
• Mehan Action: A derivative action filed in August 2020 on behalf of USO against USCF and individuals, alleging breach of fiduciary duties and failure to act in good faith. All proceedings are stayed pending disposition of dismissal motions in the In re: United States Oil Fund, LP Securities Litigation.
• In re United States Oil Fund, LP Derivative Litigation: Consolidated derivative actions filed in August 2020 on behalf of USO against USCF and individuals, alleging violations of the Exchange Act and common law claims. All proceedings are stayed pending disposition of dismissal motions in the In re: United States Oil Fund, LP Securities Litigation.

Related Party Transactions

• USCF, as the sponsor, is responsible for managing the Trust and its series and receives a management fee of 0.80% per annum of average daily total net assets for USCI and 0.65% for CPER.
• USCF pays the Trustee's annual fee of $3,300.
• USCF pays the fees of the Marketing Agent (ALPS Distributors, Inc.), calculated as 0.10% of USCI's total net assets and 0.025% of CPER's total net assets.
• USCF pays the fees of The Bank of New York Mellon (BNY Mellon) for custodial, administrative, accounting, and transfer agency services.
• USCF pays SummerHaven Investment Management, LLC (SummerHaven) an annual advisory fee of $15,000 per Trust Series plus 0.06% of average daily total net assets.
• USCF pays licensing fees to SummerHaven Index Management, LLC (SHIM) equal to an annual fee of $15,000 per Trust Series plus 0.06% of average daily total net assets.

Stakeholder Impact

• Shareholders: Experienced significant positive total returns and NAV increases, but also faced slight underperformance against benchmarks and potential erosion of cash/bond value due to inflation.
• Authorized Participants: Continue to facilitate share creations and redemptions, earning transaction fees.
• Employees/Management: USCF management (John P. Love, Stuart P. Crumbaugh) are responsible for the Trust's operations and financial reporting.
• Regulatory Authorities (SEC, CFTC, NFA, NYSE Arca): The Trust operates under their oversight, with ongoing compliance requirements and past settlements impacting USCF and USO.
• Service Providers (BNY Mellon, RBC Capital Markets LLC, Marex North America, LLC, SummerHaven): Continue to provide essential services, with their fees largely borne by USCF or the Trust.

Next Steps

• USCF will continue to manage the portfolios to track their respective Applicable Indices, aiming for average daily NAV changes within plus/minus 10% of the index changes over 30-valuation day periods.
• The Trust and its series will continue to publish monthly account statements for shareholders, including Statements of Income (Loss) and Statements of Changes in Net Asset Value, furnished to the SEC on Form 8-K and posted on the website.

Key Dates

Recommendation

The Trust's commodity funds (USCI and CPER) demonstrated strong financial performance for the six months ended June 30, 2025, with significant increases in net income, total income, and total returns. This performance is largely driven by the robust rally in the underlying commodity markets, which the funds effectively track. While there are minor tracking errors and some increased expenses, the overall positive momentum and the funds' ability to capture market upside make them attractive for investors bullish on commodities. The disclosed risks are inherent to commodity investments and appear to be well-managed, with no new material adverse developments. The past legal proceedings, while notable, are largely resolved or pertain to a different fund (USO) and do not appear to pose an immediate threat to the ongoing operations or financial health of USCI and CPER.

Keywords

Commodity Index Fund, Copper Index Fund, SEC Filing, 10-Q, Commodity Futures, Investment Performance, Net Asset Value, SummerHaven Dynamic Commodity Index, SummerHaven Copper Index, USCI, CPER, Financial Results, Market Risk, Regulatory Compliance, ETFs