For investors optimistic that natural gas prices may rebound this winter after a 40% decline, one ETF provides exposure to the commodity without tying their investment to a single security.
- While natural gas futures in the U.S. have plunged from a 14-year high in August, they have outperformed the S&P 500 Index during the past year.
- The best an only natural gas ETF is the United States Natural Gas Fund.
- This fund holds natural gas futures contracts to gain exposure to natural gas prices.
The United States Natural Gas Fund is the only natural gas ETF that trades in the U.S., excluding inverse and leveraged funds as well as those with under $50 million in assets under management. While the ETF has underperformed the 16% gain of the benchmark Bloomberg Natural Gas Subindex in the past year, it beat the 19% decline in the S&P 500 Index as of Nov. 9.
After rising to a 14-year high in August after the Russian invasion of Ukraine, natural gas prices in the U.S. suffered their longest string of weekly losses in more than two decades thanks to record production and milder-than-expected weather. Still, prices are poised to rise amid tight global gas supplies if weather is colder than forecast this winter.
Below we look more closely at the United States Natural Gas Fund. All of the data below are as of Nov. 11.
United States Natural Gas Fund LP (UNG)
- Performance Over One Year: 11.9%
- Expense Ratio: 1.11%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 6,151,771
- Assets Under Management: $527.7 million
- Inception Date: April 18, 2007
- Issuer: Marygold Cos, Inc.
UNG is structured as a commodity pool, a private investment structure that combines investor contributions to trade commodity futures contracts. The fund provides exposure to natural gas prices by buying natural gas futures contracts. UNG aims to replicate the percent change on a daily basis of the price of natural gas delivered at the Henry Hub, Louisiana. It invests in front month futures contracts, meaning the futures contracts with the nearest expiration dates. This means the fund is more exposed to the adverse impacts of contango and is thus more appropriate for traders with a short-term strategy. The ETF also may be appealing as an inflation hedge.
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