What Is the United States Natural Gas Fund?
The United States Natural Gas Fund (UNG) is an exchange-traded security designed to track percentage changes in the price of natural gas delivered to Henry Hub, Louisiana, the main U.S. benchmark for natural gas. UNG invests primarily in futures contracts but also in natural gas related futures, forwards and swap contracts and obligations of the United States government with remaining maturities of two years or less. The investments are collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.
Understanding the United States Natural Gas Fund (UNG)
The United States Natural Gas Fund (UNG) was introduced in April 2007 by Victoria Bay Asset Management and the American Stock Exchange and is listed on the NYSE Arca. Natural gas futures serve as the benchmark for natural gas prices in the United States. UNG is designed to give investors the convenience of commodity-like exposure without having a commodity futures account.
Objectives of the United States Natural Gas Fund
The United States Natural Gas Fund has the strategic investment objective of UNG to reflect the daily changes of the natural gas percentage terms in the Henry Hub, LA in its own shares’ net. The UNG accomplishes this by measuring the daily changes against the Benchmark Futures Contract. The Benchmark provides the futures contract on natural gas as traded on the NYMEX.
Example of the United States Natural Gas Fund
As an example of how the UNG operates, its website describes that if the near month contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. UNG invests primarily in listed natural gas futures contracts and other natural gas-related futures contracts and may invest in forwards and swap contracts. The purported benefits of how the UNG works are said to be:
- Offering commodity exposure without the necessity of using a commodity futures account
- Featuring including, intra-day pricing, along with market, limit, and stopping orders
- Providing portfolio holdings, market price, NAV and TNA in full transparency on the website every single day
The United States Commodity Funds, LLC is a general partner with the UNG and it is distributed by ALPS Distributors, Inc. with Brown Brothers Harriman & Co. acting as an administrator. Currently, the expense ratio of the United States Natural Gas Fund as listed through the USCF is 1.30 percent.