Gassy: UBS Talks Smack On UNG
In an interesting little exchange-traded products war of words, UBS (NYSE: UBS) issued a press release this morning telling the world its thinly traded UBS E-TRACS Natural Gas Fut Contango ETN (NYSE: GASZ) "has significantly outperformed the leading natural gas ETF, the United States Natural Gas Fund (NYSE: UNG), year-to-date, during the last 6 months and since both products could be purchased on an exchange."
It's no secret that UNG has had its struggles. A recently announced 4-for-1 reverse split indicates as much. As of February 1, UNG had almost 162.1 million shares outstanding with $821.5 million in assets under management. Amid record production and plunging natural gas prices, UNG has been in a downward spiral for over a year. The ETF flirted with $13 in June before falling below $5 earlier this year.
"GASZ is designed to capitalize on potential contango market environments typical to natural gas futures contracts. GASZ offers the potential to profit from the negative roll costs associated with the steepness in the short end of the natural gas futures curve, making it suitable for long-term investment horizons. Securities which fail to address the negative roll costs associated with contango markets lose value over time as investors are forced to repeatedly sell futures contracts at low prices and replace these with higher priced futures contracts," according to the UBS statement.
Translation: The statement tells most ETF traders and investors what they already know and that is UNG stinks and its performance suffers because of continuous rolling of futures contracts.
Still, there's no getting around the fact that GASZ has hammered UNG. Citing Bloomberg data as of Feb. 6, UBS points out that GASZ was up almost 6% year-to-date while UNG was down more than 14%. In the past six months, GASZ was up nearly 15% while UNG tumbled 45%. And since mid-June 2011, GASZ is up 14.9% compared to a 51.2% decline for UNG.
GASZ is one of 41 ETRACS ETNs.
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