Amplify Commodity Trust (BDRY)

Amplify Commodity Trust operates as a Delaware statutory trust formed on July 23, 2014, and currently consists of two series: Breakwave Dry Bulk Shipping ETF (BDRY) and Breakwave Tanker Shipping ETF (BWET), both commodity pools listed on NYSE Arca. The Funds provide investors with exposure to freight futures markets, with BDRY tracking dry bulk freight futures and BWET tracking crude oil tanker freight futures. The industry is characterized by significant volatility and geopolitical sensitivity, as evidenced by the extreme market conditions during the fiscal year, including the Baltic Dry Index averaging approximately 2,200 points over the 12-month period ending June 30, 2026, its strongest performance in three years, and unprecedented peaks in VLCC spot rates due to the U.S.–Iran conflict commencing in March 2026. The regulatory environment is comprehensive, with the CFTC and NFA overseeing commodity pool operators and trading advisors, and the Sponsor is registered as a CPO and member of the NFA.

The Funds are managed by Amplify Investments LLC, which serves as Sponsor and commodity pool operator, with Breakwave Advisors LLC acting as Commodity Trading Advisor for both Funds. The competitive positioning is defined by the Funds' unique focus on freight futures, a niche segment of the commodities market, with BDRY and BWET being the only series of the Trust. The Funds do not invest in swaps or non-cleared forwards, and their benchmark portfolios are maintained by Breakwave, providing a distinct investment vehicle for freight rate exposure. The Funds face competition from other commodity pools and ETFs, but the filing does not name specific competitors.

The core business model of the Funds is to provide investors with exposure to the daily change in the price of freight futures by tracking the performance of benchmark portfolios consisting of exchange-cleared futures contracts. Revenue is generated primarily through the sale of Creation Baskets and interest income on cash and cash equivalents, while expenses include management fees, CTA fees, brokerage commissions, and other operational costs. The Funds do not intend to make distributions, and the Sponsor has discretionary authority over distributions. The Funds generate cash from the sale of Creation Baskets and interest earned on cash and cash equivalents, and they do not anticipate using borrowings or lines of credit.

BDRY's investment objective is to track the performance of a portfolio of Dry Freight Futures, with a benchmark portfolio consisting of 50% Capesize, 40% Panamax, and 10% Supramax futures contracts. As of June 30, 2026, BDRY held futures contracts with a total notional value of $30,459,760, including Capesize, Panamax, and Supramax contracts expiring in July, August, and September 2026. The Fund's net assets were $29,999,941, with a net asset value per share of $12.12 and a market value per share of $11.87. BDRY's net income for the fiscal year ended June 30, 2026 was $40,388,599, driven by net realized gains on futures contracts of $39,708,795 and net unrealized gains of $1,177,999, offset by a net investment loss of $498,195.

BWET's investment objective is to track the performance of a portfolio of Oil Freight Futures, with a benchmark portfolio consisting of 90% TD3C and 10% TD20 futures contracts. As of June 30, 2026, BWET held futures contracts with a total notional value of $17,851,670, including TD20 and TD3C contracts expiring in July, August, and September 2026. The Fund's net assets were $15,120,270, with a net asset value per share of $151.05 and a market value per share of $148.38. BWET's net income for the fiscal year ended June 30, 2026 was $38,797,444, resulting from net realized gains on futures contracts of $43,765,463, net unrealized losses of $4,692,712, and a net investment loss of $275,307.

During the fiscal year, BDRY's share price increased 113.87% from $5.55 to $11.87, with a high of $13.33 and a low of $5.63. BWET's share price increased 1,293.88% from $10.64 to $148.38, with a high of $217.75 and a low of $10.26. The Funds experienced significant redemption activity, with BDRY redeeming 2,175,000 shares at an average price of $12.26 during the period from April 1, 2026 through June 30, 2026, and BWET redeeming 705,000 shares at an average price of $165.95 during the same period. The Funds have not made and do not currently intend to make cash distributions to shareholders.

The Trust's combined net assets increased from $67,146,259 as of June 30, 2025 to $45,120,211 as of June 30, 2026, reflecting a decrease primarily due to redemptions and market movements. BDRY's net assets decreased from $65,816,264 to $29,999,941, while BWET's net assets increased from $1,329,995 to $15,120,270. The combined net income for the fiscal year ended June 30, 2026 was $79,186,043, compared to a net loss of $17,498,770 in the prior year. The Funds' performance was driven by strong dry bulk and tanker markets, with BDRY's NAV per share increasing 115.48% and BWET's NAV per share increasing 1,320.79%.

For dry bulk, the continuation of tailwinds depends on several variables, with upcoming newbuild deliveries gradually accelerating fleet growth beyond projected demand growth, a trend that could cap further rate appreciation. For tanker, the near-term outlook is highly contingent upon political developments in the Middle East and the trajectory of the U.S.–Iran conflict, with a sharp correction in freight rates widely projected once regional hostilities cease and normal transits resume through the Strait of Hormuz.

A key growth vector for the Funds is the continued expansion of iron ore imports to China, driven by inventory accumulation, falling domestic ore production, and a structural shift toward lower-grade material, which requires greater volume to achieve equivalent steel output. Additionally, emerging iron ore exports from West Africa following the commissioning of the Simandou project, coupled with robust regional bauxite exports, are extending average sailing distances, effectively reducing available vessel capacity. These factors are expected to continue supporting high volumes of iron ore imports into China, benefiting BDRY's dry bulk freight exposure.

For BWET, the growth vector is tied to geopolitical developments in the Middle East, which have driven spot freight rates to extraordinary levels. However, the filing highlights a critical downside risk: the pronounced softening of Chinese oil demand, with maritime import volumes contracting to their lowest levels in at least eight years. The risk of a structurally lower import baseline must be factored into future projections, and the expectation for a significant downward correction in tanker freight rates over the medium term remains highly probable.

The Funds' expense structure is subject to an Expense Cap of 3.50% of average daily net assets, excluding brokerage commissions, interest expense, and extraordinary expenses, through December 31, 2026. The Sponsor and Breakwave have contractually agreed to waive fees and assume expenses to maintain this cap. After that date, if the Sponsor and/or Breakwave no longer assume expenses or waive the CTA Fee, the Funds could be adversely impacted, including in their ability to achieve their investment objectives.

The Funds' operational outlook involves maintaining liquidity through cash and cash equivalents, with a significant portion of assets held in money market funds and segregated cash as margin for futures contracts. As of June 30, 2026, BDRY held $4,429,728 in money market funds and $25,473,930 in segregated cash, while BWET held $4,510,012 in money market funds and $17,807,376 in segregated cash. The Funds do not anticipate using borrowings or lines of credit, and they meet liquidity needs from the proceeds of the sale of investments or from cash and cash equivalents.

The Funds' capital allocation is primarily directed towards maintaining positions in freight futures and holding cash equivalents. The Sponsor Fee for BDRY is the greater of 0.15% per year of average daily net assets or $125,000, while for BWET it is the greater of 0.30% per year or $50,000. The CTA Fee for both Funds is 1.45% of average daily net assets. The Funds do not have a share repurchase program, and they do not intend to make distributions.

A significant headwind for the Funds is the potential for market disruptions and illiquidity in freight futures markets, which could prevent prompt liquidation of positions. The filing notes that commodity exchanges may limit price fluctuations through daily limits, and futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Additionally, the Funds are subject to regulatory changes, including those under the Dodd-Frank Act and MiFID II, which could increase costs and impact operations.

Another constraint is the risk of a sharp correction in tanker freight rates, as traditional fundamental metrics imply a much softer freight environment, rendering conventional supply-demand modeling unreliable. The filing states that the probability of a sharp correction in freight rates remains exceptionally high, and once regional hostilities cease, freight rates are widely projected to decline sharply from their current elevated baselines.

Management's message emphasizes the strong performance of the dry bulk market, with the Baltic Dry Index averaging approximately 2,200 points over the 12-month period ending June 30, 2026, its strongest performance in three years. For the tanker market, management highlights extreme volatility due to the U.S.–Iran conflict, with spot rates for VLCCs reaching unprecedented historical peaks. The strategic priorities include maintaining the Funds' investment objectives by tracking the benchmark portfolios, managing expenses within the Expense Cap, and navigating geopolitical and market risks.

For the fiscal year ended June 30, 2026, BDRY reported net income of $40,388,599, compared to a net loss of $16,470,513 in the prior year. BDRY's net asset value per share increased 115.48% from $5.63 to $12.12, while the market value per share increased 113.87% from $5.55 to $11.87. BWET reported net income of $38,797,444, compared to a net loss of $1,028,257 in the prior year. BWET's net asset value per share increased 1,320.79% from $10.63 to $151.05, while the market value per share increased 1,293.88% from $10.64 to $148.38. The combined net assets of the Trust decreased from $67,146,259 to $45,120,211, primarily due to redemptions. BDRY's net assets decreased from $65,816,264 to $29,999,941, while BWET's net assets increased from $1,329,995 to $15,120,270. The Funds' performance was driven by net realized and unrealized gains on futures contracts, with BDRY realizing net gains of $39,708,795 and BWET realizing net gains of $43,765,463. The Funds also incurred net investment losses of $498,195 for BDRY and $275,307 for BWET. As of June 30, 2026, BDRY had $29,999,941 in net assets, with paid-in capital of $(35,328,032) and total distributable earnings of $65,327,973. BWET had $15,120,270 in net assets, with paid-in capital of $(23,497,241) and total distributable earnings of $38,617,511. The combined cash held by broker was $43,281,306, and the combined investments in securities were $8,939,740.

The Funds are subject to significant market risk due to the volatility of freight futures prices, which can be affected by geopolitical events, supply-demand dynamics, and other factors. The filing notes that the probability of a sharp correction in tanker freight rates remains exceptionally high, and once regional hostilities cease, freight rates are widely projected to decline sharply from their current elevated baselines. Additionally, the Funds face liquidity risk, as futures markets may become illiquid, preventing prompt liquidation of positions. The Funds are also exposed to credit risk, although exchange-traded futures are guaranteed by the clearinghouse. Regulatory changes, including those under the Dodd-Frank Act and MiFID II, could increase costs and impact operations. The Funds' expense structure is subject to an Expense Cap of 3.50% through December 31, 2026, and if the Sponsor and Breakwave cease to waive fees, the Funds could be adversely impacted. The Funds do not intend to make distributions, which may not be suitable for investors seeking income.