U.S.-based fund manager Breakwave Advisors is launching the first exchange-traded fund (ETF) focusing on freight futures, reflecting growing investor interest in shipping as it emerges from a near-decade long crisis, a regulatory filing showed.
Around 90 percent of traded goods by volume are transported by sea and global shipping sectors – such as dry bulk – are on course for a recovery this year, according to investors and analysts, prompting speculators to look for ways to trade.
Freight forward agreements (FFA), which allow investors to take positions on freight rates at a point in the future, are being seen as viable betting instruments.
Breakwave Dry Bulk Shipping ETF said in a prospectus filed to the SEC this week that its fund would provide investors with exposure to the daily change in the price of dry bulk FFAs by tracking the performance of a portfolio of nearest calendar derivatives contracts.
ETFs are a popular vehicle for tracking baskets of stocks, futures and derivatives, among other financial instruments, for much lower fees than actively-traded funds.
Sources familiar with matter said the ETF, the first of its kind in shipping futures, was expected to be launched in the coming weeks.
“Freight futures have not been that accessible to most investors out there,” one of the sources said, who declined to be named due to the sensitivity of the matter.
Another of the sources added that the ETF was likely to be of interest to many types investors, particularly hedge funds as they look for other types of exposure to the sector.
Hedge funds are already loading hundreds of millions of dollars into the shipping sector through investments in stocks – putting behind them losses suffered in 2013 when, based on forecasts of improved world economic growth, they piled in to shipping debt and equity.
Elsewhere, the London-run Baltic Exchange wants to make a tradable instrument out of its globally tracked main sea freight index, which gauges the cost of shipping dry bulk commodities including iron ore, grain and coal.
The Baltic is also looking into launching a freight index for LNG (liquefied natural gas), creating further scope for trading plays.