In a market defined by headlines about inflation, disrupted trade routes, and geopolitical tension, many investors have turned away from shipping and logistics. But Frank Holmes, CEO and CIO of U.S. Global Investors, sees a compelling opportunity in the arteries of the global economy—specifically, through the U.S. Global Sea to Sky Cargo ETF (ticker: SEA).
In an interview with The Wealth Advisor’s Scott Martin, Holmes outlined why global cargo and freight carriers may offer investors a strategic way to hedge against inflation, seek yield, and gain exposure to emerging markets—not through flags or borders, but with movement and flow.
Why Shipping and Air Freight Deserve a Closer Look
The SEA ETF seeks to track the performance of the U.S. Global Sea to Sky Cargo Index, a Smart Beta 2.0 benchmark that screens for the most efficient marine shipping, air freight, and port companies globally. It’s a highly focused strategy: 95% of the ETF’s holdings fall under the transportation sector, with the remaining weight split between commercial services and other industries. SEA’s net expense ratio is 0.60%, and the fund has $8.5 million in net assets.
Many of the companies in SEA’s portfolio are long-established operators, with durable business models and the ability to pass on rising costs. “The world still needs the vessels that carry all the finished products we buy in America from Asia and Europe,” Holmes says. “That’s the disconnect—intellectually and economically, I believe SEA is one of the best ways to gain leveraged exposure to the global economy.”
Investor sentiment has grown increasingly cautious, even as cargo rates rise and shipping costs for raw materials—like copper—continue to climb. Higher input costs are expected to push through to consumers. Yet, despite persistent inflation concerns and global supply chain disruptions, SEA is designed to benefit from the very conditions that challenge most sectors. As inflation takes hold and supply networks strain, cargo and freight companies may be well positioned to generate stronger revenues and expand margins.
Smart Beta 2.0: A Dynamic Framework for Portfolio Construction
The foundation of SEA is its quantamental index methodology. Unlike traditional cap-weighted benchmarks, the U.S. Global Sea to Sky Cargo Index uses a multi-factor approach to rank companies by metrics such as free cash flow yield, return on invested capital, and earnings-to-price ratios. The weighting system is designed to reward companies with superior fundamentals while recalibrating regularly to respond to changes in policy, innovation, or corporate performance.
“Smart Beta 2.0 recalibrates every quarter,” Holmes explains. “It adapts to events like takeovers, innovations, or policy changes such as tariff wars. This ensures the portfolio favors companies with strong earnings growth and cash flow.”
The emphasis on dynamic weighting reduces concentration risk. Unlike broad indexes like the S&P 500, which are dominated by a handful of tech giants, SEA holds a diverse basket of global companies across market caps. About half the portfolio is in large-cap stocks, while mid-cap names make up 44%, and small caps round out the rest.
When describing the process behind SEA’s index, Holmes explains how rigorous and data-driven the approach is. “We test different weightings, backtest them through market cycles, and identify stock factors like revenue growth and free cash flow yield,” he says. “Then we build and validate the strategy before launching.” The result is a portfolio engineered to tilt toward momentum and fundamentals, not just size.
SEA as a Hedge Against Inflation and Currency Volatility
Many clients today are not just chasing performance—they’re actively trying to protect their purchasing power. Holmes emphasizes that inflation, when measured using older metrics, is running far higher than the reported Consumer Price Index would suggest. “If we used the same methodology as in 1980, inflation would be running at 12% to 15% today,” he says. “At 15% inflation, you lose half of your purchasing power in five years.”
From that standpoint, SEA aims to function as a hedge. It’s tied to tangible economic activity: goods moving across oceans and skies, priced in real time. “You can capitalize on global trade growth and earn strong dividends—even if markets move sideways,” Holmes says.
Beyond inflation, currency dynamics are shifting. Holmes highlights the growing push from China and other BRICS (Brazil, Russia, India, China, and South Africa) nations to de-dollarize, and the emergence of digital dollars through platforms such as Tether. That broader monetary evolution underscores the importance of hard assets and real infrastructure in portfolios.
“Clients are feeling the pressure. They want to protect their purchasing power—and that’s really the core idea behind gold,” Holmes says. “It’s not about the end of the world; it’s about imbalances between fiscal and monetary policy.”
SEA fits within that macroeconomic framework, offering exposure to physical trade networks that remain critical regardless of how the global currency regime evolves.
Connecting the Dots Across Sectors and Geographies
SEA isn’t just a play on cargo ships and air freight. Holmes sees a broader shift underway—an emerging military-industrial ecosystem in Europe; increased STEM investments in the U.S.; and growing demand for infrastructure to support AI, data centers, and national defense.
In Europe, defense spending is ramping up rapidly. Germany alone is targeting 5% of GDP, and Holmes points to a rebound in key economic indicators as a sign that industrial demand may follow. “Germany’s economy, a year ago, their Purchasing Managers’ Index (PMI) was in the low 40s. Now it’s at 51,” he says, noting that PMI is “a six-month leading indicator of economic activity.”
Those macro trends matter for SEA. The materials and hardware needed for defense and technology—including steel, iron ore, and components for data centers—all move through the shipping and logistics networks SEA holds. That puts the ETF in the flow of capital-intensive growth initiatives, not just consumer trade.
“As an RIA, you start thinking: data centers are booming—but what about the components? Who makes the HVAC systems? Who builds the fiber optics? Those companies are about to enter secular bull markets,” Holmes says.
By connecting those dots, advisors can position client portfolios to potentially benefit from indirect exposure to macroeconomic shifts that are harder to capture through traditional sector- or country-focused ETFs.
Rethinking Emerging-Market Exposure
Allocations to emerging markets traditionally come through country-specific funds or regional baskets, which can act as blunt instruments. But these funds often lack flexibility and may not reflect the economic drivers powering growth in those regions.
In contrast, SEA offers a more nuanced approach. Rather than isolating one country or region by its political or economic profile, SEA emphasizes the movement of goods—arguably the more reliable signal of economic momentum.
Deploying the more functional lens of trade networks, SEA includes companies across Taiwan, China, Hong Kong, Norway, Japan, South Korea, and other markets, offering exposure to a wide array of global trade hubs.
Its holdings are screened for size and liquidity, and its weighting system prioritizes firms with strong fundamentals and operating scale.
For advisors seeking diversified access to emerging-market activity without overreliance on any one government, index, or sector, SEA may offer a more targeted and infrastructure-based entry point.
Seeking Alpha Through Smarter Weighting and Rebalancing
At its core, SEA reflects Holmes’s long-held belief that successful investing combines data, discipline, and adaptability. “Making money in investing is binary, like the internet’s zeros and ones,” he says. “It’s not just about picking good stocks; it’s about how you weight them. Great stocks with small weights won’t generate alpha, and small weights in poor stocks can still help. It’s all about balance.”
SEA’s quarterly rebalancing ensures that the ETF continues to favor companies outperforming their peers in key performance metrics. “It’s weighted for both the velocity of revenue and revenue growth that’s bigger than the economy’s,” Holmes explains. “Those are the stocks we want to own. When they break out like this on a quarterly basis, they usually continue for at least three quarters—about nine months, like having a baby.”
The consistency in process, combined with regular recalibration, aims to capture compounding performance without becoming overexposed to a small group of large-cap names.
Thematic Access to Global Trade and Inflation-Linked Growth
Advisors looking for alternatives to traditional inflation hedges or seeking smarter access to global growth may find SEA worth a closer look. The fund offers exposure to a vital segment of the economy that often gets overlooked: the resilience of global trade. With its Smart Beta 2.0 methodology, broad geographic reach, and dynamic weighting approach, SEA aims to offer both diversification and thematic relevance.
“You have to look deeper. Something else might be happening,” Holmes explains. “That curiosity—asking what’s really going on—keeps your thinking sharp. You start connecting the dots: What’s related to what? Why is that affecting this?”
SEA may not be the most obvious addition to a traditional allocation, but it sits at the intersection of supply chains, macro policy, and thematic growth. In a market where advisors are tasked with identifying durable, noncorrelated opportunities, shipping and logistics may represent a strategic channel for growth—and SEA offers a systematic way to access it.
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Additional Resources
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Disclosures
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a statutory and summary prospectus by visiting www.usglobaletfs.com. Read it carefully before investing.
This content is for educational purposes only and not intended as investment advice. Advisors should conduct their own due diligence or visit SEAETF.com for more information.
Distributed by Quasar Distributors, LLC. U.S. Global Investors is the investment adviser to SEA.
