10-Q: Commodity Funds See Strong Gains in Q3 2025

United States Commodity Index Funds Trust reported significant NAV growth and positive total returns for both its Commodity Index Fund (USCI) and Copper Index Fund (CPER) for the nine months ended September 30, 2025, driven by rising commodity prices.

Summary

• The United States Commodity Index Funds Trust, comprising USCI and CPER, reported a consolidated net income of $67,205,827 for the nine months ended September 30, 2025, a substantial increase from $36,748,855 in the prior year period.
• Total assets for the Trust grew to $551,390,508 as of September 30, 2025, up from $334,931,201 at December 31, 2024.
• The United States Commodity Index Fund (USCI) achieved a net income of $37,123,585 for the nine months ended September 30, 2025, compared to $16,791,710 in the same period of 2024.
• USCI's Net Asset Value (NAV) per share increased to $77.82 as of September 30, 2025, from $66.04 at December 31, 2024, representing a total return of 17.84%.
• The United States Copper Index Fund (CPER) reported a net income of $30,082,242 for the nine months ended September 30, 2025, up from $19,957,145 in the prior year period.
• CPER's NAV per share rose to $29.93 as of September 30, 2025, from $25.23 at December 31, 2024, yielding a total return of 18.63%.
• Both USCI and CPER successfully tracked their respective benchmarks, the SummerHaven Dynamic Commodity Index Total ReturnSM (SDCI) and the SummerHaven Copper Index Total ReturnSM (SCI), within the target +/10% range over 30-valuation days.
• Commodity futures prices generally rose during the nine months ended September 30, 2025, with the SDCI up 18.85% and the SCI up 19.56%.
• Copper futures reached an all-time high on July 23, 2025, driven by global undersupply forecasts and anticipated tariffs, though prices saw a 22% drop on July 31, 2025, after tariffs were levied on finished products rather than raw metal.
• USCI underperformed its SDCI benchmark by (1.01)% and CPER underperformed its SCI benchmark by (0.93)% for the nine months ended September 30, 2025, primarily due to expenses.

Sentiment

Score: 7

Explanation: The Trust and its funds, USCI and CPER, demonstrated strong financial performance with significant increases in net income and total assets, driven by a generally rising commodity market. Both funds successfully met their benchmark tracking objectives. However, they slightly underperformed their benchmarks due to expenses, and the market faces ongoing risks from geopolitical conflicts, tariffs, and interest rate fluctuations.

Positives

• Net income for the overall Trust significantly increased to $67,205,827 for the nine months ended September 30, 2025, from $36,748,855 in the prior year.
• Total assets for the Trust grew substantially to $551,390,508 as of September 30, 2025, from $334,931,201 at December 31, 2024.
• USCI achieved a strong total return of 17.84% for the nine months ended September 30, 2025, with its NAV per share rising to $77.82.
• CPER delivered a robust total return of 18.63% for the nine months ended September 30, 2025, with its NAV per share increasing to $29.93.
• Both USCI and CPER successfully met their investment objectives by tracking their respective benchmarks within the targeted +/10% range over 30-valuation days.
• Commodity futures prices broadly rose during the period, with the SDCI up 18.85% and the SCI up 19.56%, indicating a favorable market environment for commodity-linked investments.
• Copper futures reached an all-time high on July 23, 2025, driven by growing undersupply and strong demand forecasts from China and new technologies.
• Historically, commodities have provided diversification from stocks and bonds, outperforming equities in five out of eight past recessions, suggesting their potential as a hedge during uncertainty.
• Management anticipates that interest rates may continue to increase, potentially leading to outperformance if interest earned exceeds fees and expenses.

Negatives

• USCI underperformed its SDCI benchmark by (1.01)% for the nine months ended September 30, 2025, primarily due to expenses.
• CPER underperformed its SCI benchmark by (0.93)% for the nine months ended September 30, 2025, also primarily due to expenses.
• Average interest rates earned on short-term investments for both USCI and CPER were lower during the nine months and three months ended September 30, 2025, compared to the same periods in 2024, resulting in a lower percentage of income relative to average daily total net assets.
• Copper prices fell 22% on July 31, 2025, after the Trump administration decided to levy tariffs on finished copper products instead of the raw metal, causing a collapse of the premium over London futures.
• The Trump administration's tariff actions have increased the risk of a global economic slowdown or recession, which could reduce demand for commodities, including copper.

Risks

• Market risk, specifically commodity price risk, exposes the Trust Series to potential losses from changes in the market value of futures contracts and other derivatives.
• Credit risk exists from the possibility of counterparties failing to meet their obligations under contracts, particularly with OTC swaps.
• The insolvency of a Futures Commission Merchant (FCM) could limit recovery to a pro rata share of segregated funds, potentially less than the total deposited, and the failure of the Trust Series custodian could result in substantial asset loss.
• Market volatility, driven by events such as the COVID-19 pandemic, supply chain disruptions, wars (e.g., Russia-Ukraine, Middle East), tariffs, and trade wars, can negatively impact the value, pricing, and liquidity of investments.
• Illiquid markets, potentially caused by daily price limits on commodity exchanges, could prevent the Trust Series from promptly liquidating positions.
• Interest rate risk means that fixed income securities and other investments may fluctuate in value due to changes in interest rates, potentially leading to losses or lower reinvestment rates.
• Inflation risk can erode the value of cash and Treasury investments, especially in a high inflation environment.
• Government money market funds, in which the Trust Series invest, do not guarantee a stable $1.00 per share NAV, and there is a risk of losing money.
• Tracking error risk can occur if execution prices differ from settlement prices, due to expenses, holding different commodity contracts, or varying contract weights, causing the NAV to deviate from the benchmark.
• Changes in U.S. federal income tax laws or regulations could have adverse tax consequences for the Trust Series and its investors.
• Competing claims of intellectual property rights could lead to litigation expenses or changes in investment objectives, strategies, or benchmarks.
• The Trust Series could face funding risk if USCF and the Trust are unsuccessful in raising sufficient funds to cover expenses, potentially leading to termination of one or more Trust Series.
• Although not intended, the Trust Series could become leveraged if it holds insufficient assets to meet current and future margin or collateral obligations.

Future Outlook

Management anticipates that interest rates may continue to increase from historical lows in the near future. It is expected that fees and expenses paid by each Trust Series may continue to be lower than interest earned, potentially leading to outperformance of their respective benchmarks. The relationship between the market price of shares and the spot prices of underlying commodities is likely to remain influenced by contango and backwardation. Copper demand is projected to remain robust with constrained supply over the longer term, despite potential short-term price pressures from economic uncertainty. The impact of potential new federal income tax legislation and regulations remains uncertain and could result in adverse tax consequences.

Management Comments

• "USCF believes that the market arbitrage opportunities will cause the daily changes in USCIs share price on the NYSE Arca on a percentage basis to closely track the daily changes in USCIs per share NAV on a percentage basis."
• "USCF believes that the net effect of this expected relationship and the expected relationship described above between USCIs per share NAV and the SDCI will be that the daily changes in the price of USCIs shares on the NYSE Arca on a percentage basis will closely track the daily changes in the SDCI on a percentage basis, less USCIs expenses."
• "USCF believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in listed Futures Contracts and Other Related Investments." (Regarding making the nominal price of NAV equal to the nominal price of the index or spot price).
• "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."
• "USCF, USO, and the individual defendants intend to continue vigorously contesting any such claims." (Regarding the Lucas Class Action and Derivative Litigation).

Industry Context

Commodity markets have broadly rallied over the past five years since the COVID-19 pandemic, with notable gains as inflation rose from 1.4% in 2020 to 9.1% in 2022, as commodities historically act as a hedge against inflation. While commodities declined with falling inflation in mid-2022, the SDCI's dynamic strategy has led to significant outperformance against major commodity indexes since then. The Trump administration's April 2025 tariff announcements increased global economic slowdown risks, potentially reducing commodity demand, despite tariffs being inherently inflationary. Commodities often provide diversification from stocks and bonds, outperforming equities in five out of eight past recessions. Copper futures reached an all-time high in July 2025 due to global undersupply and demand from China and new technologies, though prices reacted sharply to tariff specifics. Copper supply is particularly sensitive to events in South American mining nations, while demand is tied to global economic health.

Comparison to Industry Standards

• USCI's actual total return of 17.84% for the nine months ended September 30, 2025, underperformed its benchmark, the SummerHaven Dynamic Commodity Index Total ReturnSM (SDCI), which had a hypothetical return of 18.85%, resulting in a (1.01)% difference.
• CPER's actual total return of 18.63% for the nine months ended September 30, 2025, underperformed its benchmark, the SummerHaven Copper Index Total ReturnSM (SCI), which had a hypothetical return of 19.56%, resulting in a (0.93)% difference.
• Over the period from December 31, 1997, to September 30, 2025, the SDCI Total Return significantly outperformed other major commodity indices, with a total return of 1,130.16% compared to S&P GSCI Commodity Index Total Return (68.84%), Bloomberg Commodity Index Total Return (26.79%), and Deutsche Bank Liquid Commodity Index-Optimum Yield Total ReturnTM (331.24%).
• The SDCI also demonstrated superior risk-adjusted performance with an Annualized Sharpe ratio of 0.59, compared to S&P GSCI (0.09), Bloomberg Commodity Index (0.09), and Deutsche Bank Liquid Commodity Index (0.29) for the period from December 31, 1997, to September 30, 2025.
• For the period from December 31, 1997, to September 30, 2025, the SCI Total Return outperformed the Bloomberg Copper Subindex Total Return (584.32%) and spot copper prices less storage cost (162.77%), achieving a total return of 945.22%.
• The SCI exhibited a higher Annualized Sharpe ratio of 0.48 compared to the Bloomberg Copper Subindex Total Return (0.40) and spot copper prices less storage cost (0.25) for the period from December 31, 1997, to September 30, 2025, indicating better risk-adjusted returns.

Corporate Governance

Legal Proceedings

• The Optimum Strategies Action, filed April 6, 2022, against USO and USCF, asserting claims under the Securities Exchange Act of 1934 and the Connecticut Uniform Securities Act, was dismissed by the court on March 15, 2023, with prejudice for federal claims and without prejudice for the state law claim.
• USCF and USO reached a resolution with the SEC and CFTC on November 8, 2021, regarding Wells Notices issued in August 2020, resulting in cease-and-desist orders and civil monetary penalties totaling $2,500,000 paid by USCF.
• The In re: United States Oil Fund, LP Securities Litigation (Lucas Class Action), a consolidated class action filed June 19, 2020, challenging disclosures related to extraordinary market conditions in 2020, had the defendants' motion to dismiss granted without prejudice on September 29, 2025, with leave for the plaintiff to amend the complaint by November 26, 2025.
• The Wang Class Action, a putative class action filed July 10, 2020, asserting federal securities claims under the 1933 Act, was voluntarily dismissed on August 4, 2020.
• The Mehan Action, a derivative action filed August 10, 2020, alleging breach of fiduciary duties, is stayed pending final disposition of motions to dismiss in the Lucas Class Action.
• The In re United States Oil Fund, LP Derivative Litigation (Cantrell and AML Actions), consolidated derivative actions filed August 27, 2020, alleging Exchange Act violations and common law claims, are stayed pending final disposition of motions to dismiss in the Lucas Class Action.

Related Party Transactions

• USCF receives a management fee of 0.80% per annum of average daily total net assets from USCI and 0.65% per annum from CPER.
• USCF pays the Trustee's annual fee of $3,300.
• USCF pays ALPS Distributors, Inc. a marketing agent fee equal to 0.10% of USCI's total net assets and 0.025% of CPER's total net assets.
• USCF pays The Bank of New York Mellon for custodial, administrative, accounting, and transfer agency services.
• USCF pays SummerHaven Investment Management, LLC an annual advisory fee of $15,000 per Trust Series plus 0.06% of the average daily total net assets of each Trust Series.
• USCF pays licensing fees to SummerHaven and SHIM equal to an annual fee of $15,000 per Trust Series, plus an annual fee of 0.06% of the average daily total net assets of each Trust Series.
• USCF's voluntary expense waiver for CPER, which covered expenses exceeding 0.15% of CPER's NAV, was terminated as of April 30, 2021.

Stakeholder Impact

• Shareholders of USCI and CPER experienced positive total returns and NAV growth, benefiting from rising commodity prices.
• Shareholders are exposed to market risks, tracking error, and potential impacts from ongoing legal proceedings and broader economic conditions.
• USCF, as the sponsor, benefits from increased management fees due to higher average daily total net assets but also bears various operational, marketing, and legal expenses.
• Authorized Participants continue to facilitate share creations and redemptions, paying transaction fees.
• Service providers like SummerHaven, BNY Mellon, RBC Capital Markets LLC, and Marex Capital Markets, Inc. receive fees for their advisory, administrative, custody, and brokerage services.
• Regulatory authorities (SEC, CFTC) continue to oversee the Trust's operations, having previously imposed penalties on USCF and USO for past violations.

Next Steps

• The plaintiff in the In re: United States Oil Fund, LP Securities Litigation has until November 26, 2025, to move to amend the complaint.
• USCF and other defendants intend to vigorously contest claims in ongoing legal proceedings.
• The Trust Series will continue to monitor exposure to market and counterparty risk.
• USCF anticipates interest rates may continue to increase over the near future.

Key Dates

Recommendation

The Trust's commodity funds (USCI and CPER) demonstrated strong positive returns and significant asset growth for the nine months ended September 30, 2025, benefiting from a generally rising commodity market. Both funds effectively tracked their respective benchmarks within the stated objectives. However, they consistently underperformed their benchmarks due to inherent expenses, and the broader market faces ongoing uncertainties from geopolitical tensions, trade tariffs, and fluctuating interest rates. While the dismissal of a major class action lawsuit is a positive legal development, the leave to amend means litigation risk persists. Given the strong performance but also the persistent tracking error and external market volatility, a "Hold" recommendation is appropriate for investors seeking commodity exposure, acknowledging both the upside potential from commodity trends and the inherent costs and risks.

Keywords

Commodity Index Fund, Copper Index Fund, SEC Filing, 10-Q, USCI, CPER, Futures Contracts, Commodity Pool, SummerHaven Dynamic Commodity Index, SummerHaven Copper Index, Financial Performance, Net Asset Value, Total Return, Market Risk, Credit Risk, Inflation, Tariffs, Geopolitical Risk, Investment Management, Exchange Traded Fund