UNL, UNG, and UGA are the best ETFs for Q3 2022

Exchange-traded funds (ETFs) hold a collection of securities—such as stocks—that often track an underlying index. While they are similar to mutual funds in some ways, ETFs are different in that they are listed on exchanges and can be traded throughout the day like traditional stocks.

In recent years, ETFs have become immensely popular with investors for two major reasons:

  1. They provide an easy access point to a wide variety of sectors, industries, and strategies.
  2. They tend to minimize many of the risks inherent in investing in individual stocks.

Key Takeaways

  • The best exchange-traded funds (ETFs) by one-year trailing total returns have dramatically outperformed the broader market over the past year.
  • The ETFs with the best one-year trailing total returns are UNL, UNG, and UGA.
  • The top holding of the first two funds is natural gas futures, while the third fund mainly holds reformulated gasoline futures.

There are 1,685 ETFs that trade in the United States, excluding leveraged and inverse funds as well as those with less than $50 million in assets under management (AUM).

All three of the top-performing ETFs are linked to energy commodities that have dramatically outperformed the S&P 500 Index over the past year. These aren’t formal benchmarks, but oil, natural gas, and gasoline have returned 91.2%, 178.8%, and 100.5% as measured by the Bloomberg Composite Crude Oil Subindex, Bloomberg Natural Gas Subindex, and Bloomberg Unleaded Gasoline Subindex respectively. The S&P 500 has provided a total return of -1.9% over the past 12 months, as of May 26, 2022.

The performance of these energy-related commodity ETFs has been driven by a number of forces, including the spike in oil, natural gas, and gasoline prices following increased demand in post-COVID economic reopening across the world. Also, OPEC+ has been slow to increase the supply of oil. And the ban on Russian energy imports by the United States and its allies has also spurred prices.

The best-performing ETF, based on performance over the past year, is the United States 12 Month Natural Gas Fund LP (UNL).

We examine the best three ETFs below. All numbers below are as of May 26, 2022.

United States 12 Month Natural Gas Fund LP (UNL)

  • Performance Over One Year: 204.4%
  • Expense Ratio: 0.90%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 104,628
  • Assets Under Management: $50.8 million
  • Inception Date: Nov. 18, 2009
  • Issuer: Concierge Technologies

UNL aims to track prices of natural gas as measured by the fund’s Benchmark Futures Contracts, after expenses. The benchmark is the near-month futures contract to expire and contracts for the next 11 months, for 12 straight months. If the near-month futures contract expires in two weeks, the benchmark will be the next month’s contract to expire as well as contracts for the next 11 months.

The fund provides exposure to natural gas prices by investing mainly in natural gas futures contracts as well as forward and swap contracts. By holding futures contracts across multiple maturities, UNL aims to reduce the risk of contango.

United States Natural Gas Fund LP (UNG)

  • Performance Over One Year: 180.0%
  • Expense Ratio: 1.11%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 8,272,690
  • Assets Under Management: $545.5 million
  • Inception Date: April 18, 2007
  • Issuer: Concierge Technologies

UNG is structured as a commodity pool, a private investment structure that pools investor contributions and then trades futures and options in commodities on their behalf. The fund’s goal is to reflect the performance of the daily change on the Benchmark Futures Contract on natural gas as traded on the New York Mercantile Exchange (NYMEX).

The ETF invests in futures contracts set to expire within the next month, which leaves it exposed to adverse impacts of contango. For this reason, UNG may be more appropriate for traders with a short-term strategy or as a hedge against inflation. UNG provides exposure to natural gas prices by holding natural gas futures contracts and related futures contracts.

United States Gasoline Fund LP (UGA)

  • Performance Over One Year: 104.3%
  • Expense Ratio: 0.90%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 105,558
  • Assets Under Management: $152.5 million
  • Inception Date: Feb. 26, 2008
  • Issuer: Concierge Technologies

Like UNG, UGA is structured as a commodity pool that uses investor contributions to trade commodity futures and options contracts. The fund seeks to replicate the daily percentage change in the price of gasoline, also known as reformulated gasoline blendstock for oxygen blending (RBOB), as measured by the Benchmark Futures Contract.

UGA invests in listed RBOB futures contracts and other gasoline-related futures contracts set to expire within the next month. The fund’s short-term focus is likely to make it less attractive to investors seeking a long-term, buy-and-hold investment strategy. The strength of UGA, however, is that it provides targeted exposure to a specific sector of the energy market.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  1. YCharts. “Financial Data.”

  2. Bloomberg. “How Russia’s War in Ukraine Is Choking the World’s Supply of Natural Resources.”

  3. American Automobile Association. “Gas Prices.”

  4. VettaFi (formerly ETF Database). “ETF Screener.”

  5. USCF Investments. “UNL | United States 12 Month Natural Gas Fund.”

  6. VettaFi (formerly ETF Database). “UNL: United States 12 Month Natural Gas Fund LP.”

  7. USCF Investments. “UNG | United States Natural Gas Fund.”

  8. VettaFi (formerly ETF Database). “UNG: United States Natural Gas Fund LP.”

  9. USCF Investments. “UGA | United States Gasoline Fund.”

  10. VettaFi (formerly ETF Database). “UGA: United States Gasoline Fund LP.”

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