Broad commodity ETFs such as DBC (PowerShares DB Commodities, Expense Ratio 0.93%) have been taking their lumps in recent sessions, trading at its lowest level since late last summer, largely on the weakness in Crude Oil, which between Brent and WTI futures makes up about 27% of the underlying basket.
Agricultural commodities including Sugar and Corn for example and precious metals including Gold (with the exception of today’s bid) have also absolutely taken it on the chin recently, fueling the decline in broad based commodity tracking ETFs.
One bright spot in recent sessions in commodity land has been that of Natural Gas, as stronger than expected delivery numbers yesterday from the EIA spurred some buying, which has followed through this morning as related ETPs are gapping up.
UNG (U.S. Natural Gas Fund, Expense Ratio 0.60%) remains the largest futures based ETP in this category, having garnered $925 million in assets under management, and the fund is flirting with its highest levels since December of last year ($22.38 was touched briefly seven trading sessions ago before reverting lower).
Other, lesser known ETPs in this category include UNL (U.S. 12 Month Natural Gas Fund, Expense Ratio 0.75%), NAGS (Teucrium Natural Gas Fund, Expense Ratio 1.50%), DCNG (iPath Seasonal Natural Gas ETN, Expense Ratio 0.75%), GAZ (iPath DJ-UBS Natural Gas ETN, Expense Ratio 0.75%), GASZ (UBS E-TRACS Natural Gas Futures Contango ETN, Expense Ratio 0.85%).
Leveraged long ETPs that may see an uptick in activity in the near term, given the recent path of Natural Gas prices include UGAZ (VelocityShares 3X Long Natural Gas ETN, Expense Ratio 1.65%) and BOIL (ProShares Ultra DJ-UBS Natural Gas, Expense Ratio 0.95%).
It is important that the end investor recognize the limitations of futures based ETPs here, and the potential dislocation that has historically occurred versus spot returns of the commodity itself, as well as the consequences of daily leveraging in case of UGAZ and BOIL for example.
U.S. Natural Gas Fund (UNG)
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- Natural Gas