One of the most successful ETFs in the first half of this year has been the Breakwave Dry Bulk Shipping ETF (NYSEARCA:BDRY), which has registered a gain of more than 250% YTD. It has been a spectacular gain for an ETF tracking a market with which many investors will be unfamiliar.
On the podcast this week we have John Kartsonas, Managing Partner at Breakwave Advisors. Breakwave acts as the advisor for the BDRY ETF. The firm offers asset management and advisory services to the shipping and commodities industries. Prior to joining Breakwave John was a senior portfolio manager at Carlyle Commodity Management in New York (part of private equity mammoth Carlyle Group). He used to manage one of the largest freight futures funds in the world.
John was also a co-founder and portfolio manager with the Sea Advisors Fund, an investment fund focused on shipping. He sits on the board of Seanergy Maritime (NASDAQ:SHIP), a publicly-traded dry bulk shipping company.
The shipping industry is one of the most important industries in the world but is very underrepresented in global financial markets. Breakwave Advisors was founded to launch what was the only ETF in the world that would track shipping rates rather than equities. It was hard to structure and model a product like this, but BDRY has now been up and running for three years.
Kartsonas himself acknowledges that it was a steep learning curve, but he now has a product which tracks the dry bulk shipping industry.
Covered on the podcast
On the podcast we discuss the market for shipping derivatives – what are they and why have they been historically tough to access for smaller investors? We focus on dry bulk in particular, as this is the underlying market for BDRY. Very few pro investors have had the time or scope or indeed the appetite for risk to be able to trade this market effectively.
We also discuss what has created the current bull market for shipping futures, especially the impact of the pandemic on the shipping market. Transportation saw a very slow period in 2020, for example. How did that hit shipping and what has changed since the start of this year? As Kartsonas says, “suddenly everyone is looking for a ship to move goods.”
Rates are now up tenfold. In the full decade prior to 2021 they hardly moved. Now there are not enough ships around the world.
There are other pressures as well, of course, like Asian countries ordering more grains to rebuild their inventories, as well as a general inflation in commodity prices (iron ore being a good example). Shipping prices are going to have to go up. We discuss the last commodity super cycle (2006-08) and what the likely impact will be on shipping rates.
Most importantly we ask John about how long this disruption in shipping is likely to go on and whether there is going to be more upside momentum. He also explains how the BDRY ETF works in practice and is able to pass on the price action in the shipping market to investors.
