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SonicShares Launches Global Shipping ETF (BOAT)

SonicShares recently announced the launch of SonicShares Global Shipping ETF BOAT. The timing of the launch of the fund seems quite apt as there is not much competition in the shipping ETF space and the sector is currently red-hot. Against this backdrop, below we highlight the fund in details.

Inside BOAT

The SonicShares Global Shipping ETF (BOAT) offers pure-play exposure to the global maritime shipping industry. BOAT is an indexed ETF that looks to provide performance results that correspond, before fees and expenses, to the Solactive Global Shipping Index.

The index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges only 69 bps in fees. Castor Maritime (8.78%), Atlas Corp (8.55%) and Costamare (8.04%) are the top three stocks of the fund.

How Does It Fit in a Portfolio?

About 90% of the world’s trade is carried by sea, making maritime shipping an important area for fund managers to continue. A commodity boom is driving the prices as demand for shipping is high. Ultra-easy monetary and fiscal policies are driving global economic growth and the demand for goods. “Inefficiencies and port congestion could also contribute to increasing shipping costs,” per some analysts. This is happening because ships are getting held by COVID-19 quarantines.

Mark Williams, managing director of Shipping Strategy, a maritime consultancy does not see this as a super cycle but believes that “it has the potential to become one,” as quoted on CNBC. He said that rates for capesize vessels — the largest category of ships that carry dry cargo and raw materials such as grain, iron ore and coal — are hovering around the levels seen in mid-2019. Reuters recently noted that the average daily earnings for capesizes were $31,880 — a jump of more than 10 times from February last year, if we go by the CNBC article (read: Shipping ETF Up 230% This Year: What Lies Ahead?).

The future of the industry seems rosy. Fleet sizes are not expected to grow significantly in the next few years, per industry watchers, as noted by the CNBC article. No addition of new ships and the phasing out of certain older vessels should keep the fleet size low and freight rates higher. So, freight rates are likely to remain high, at least in the second half of 2021. Mark Williams expects a “really firm market” in 2022 and sees a “very strong chance” of it continuing into 2023.

Any Competition?

There is a fund already ruling the space. The name of the fund is Breakwave Dry Bulk Shipping ETF BDRY. It offers investors an unlevered exposure to dry bulk freight without the need for a futures account.  It intends to progressively increase its position to the next calendar quarter three-month strip while existing positions are maintained and settled in cash. The initial freight futures allocation will be 50% Capesize contracts, 40% Panamax contracts and 10% Supramax contracts, rebalancing annually, as needed, during the first two weeks of the month of December. The expense ratio of the fund is 3.32%.


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