ETF Chart of the Day: Natural Gas

ETF Trends

Last week, a prominent Natural Gas based ETF took in nearly $200 million, equating to almost 18% of the assets outstanding in the fund at the time. U.S. Natural Gas Fund (UNG) has seen a notable increase in trading volume as well, as the fortunes of Natural Gas the commodity have changed rapidly since its lows back in mid-April.

UNG for example has risen a staggering 43% from its April lows, as have other related long Natural Gas ETPs.

UNG is the undisputed leader in the space in terms of assets, with well north of $1 billion under management, but two alternatives exist that may indeed offer better exposure to returns of the physical commodity of Natural Gas.

U.S. 12 Month Natural Gas Fund (UNL) and Teucrium Natural Gas Fund (NAGS) exist as well, but currently only trade about 47,000 shares and 4,000 shares apiece respectively, so they generally evade the radars of most ETF using portfolio managers.

That aside, both funds have demonstrated encouraging live returns since inception versus the much larger UNG, and over time, we believe that institutional and retail investors will notice the live performance and assets may gradually migrate into these smaller, but seemingly more efficient funds.

UNL and NAGS were both designed to mitigate the costs of contango (that typically exists in the futures markets for Natural Gas) that have been much documented in the press, and have seriously hampered UNG over time in terms of eating away at overall returns.

The two funds have separate methodologies, and should be dissected by interested portfolio managers, but from a pure numbers standpoint, one can see the appeal in either UNL or NAGS.

Since UNL’s inception in April of 2007, the fund is down 64.04% versus UNG’s loss of 89.76% during the same time period.

Similarly, NAGS has only been live in the marketplace since February of 2011, but performance results follow the same general pattern of the UNG/UNL comparison above. Year to date, NAGS has fared the best, down 13.90% versus UNL falling 16.14% and UNG losing 21.44%. Additionally, for those comfortable with long exposure to Natural Gas/futures based ETF products, ProShares DJ-UBS Natural Gas 2X (BOIL) may be attractive for those whom want leveraged returns.

U.S. Natural Gas Fund

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For more information on Street One ETF research and ETF trade execution/liquidity services, contact pweisbruch@streetonefinancial.com.

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