Breakwave Advisors, a US-based commodity trading advisor, has partnered with ETF Managers Group to launch the world’s first ETF providing long exposure to crude oil freight futures.
The ETF is the first in the world to offer exposure to oil tanker freight futures.
The Breakwave Tanker Shipping ETF (BWET US) has been listed on NYSE Arca with an expense ratio of 3.50%.
Breakwave notes that the crude oil tanker shipping market continues to change rapidly due to ongoing geopolitical tensions that are shifting oil flows and altering traditional shipping routes.
Moreover, evolving environmental regulations are expected to continue impacting the cost of transporting crude oil worldwide, creating a unique investment opportunity.
Investment approach
The ETF’s portfolio consists of a 90% allocation to Very Large Crude Carriers (VLCC) futures contracts and a 10% allocation to Suezmax futures contracts, rebalanced annually.
The fund targets near-term contracts, holding a mix of futures that expire in one to six months and targeting a weighted average maturity of approximately three months to expiration. The strategy progressively increases its position to the next calendar quarter’s three-month strip while existing positions are maintained and settled in cash.
The fund is the second shipping-related ETF from Breakwave following the Breakwave Dry Bulk Shipping ETF (BDRY US) which debuted in 2018 and provides exposure to futures contracts for dry bulk shipping space. Such space is used to transport major hard commodities such as iron ore, coal, grain, and other commodities such as bauxite and phosphate, minerals, fertilizers, and forestry products.
Commenting on the new listing, John Kartsonas, Managing Partner of Breakwave Advisors, said: “We are thrilled to introduce such an innovative product to the market, targeting another segment of the shipping industry, namely tankers. The tanker market has recently shown its growing importance when it comes to energy security as well as the significant returns the sector can generate over the full cycle.
“Today, the tanker industry is faced with high demand for oil transportation, a limited vessel order book, disruptions in the traditional shipping routes, and longer shipping distances as a result of the major geopolitical changes affecting the oil markets. As has been the case with BDRY, BWET allows all market participants to directly invest in an otherwise difficult-to-access market using a simple, transparent, equity-like investment product.”