Why New Shares Were Issued For The Natural Gas ETF (UNG)

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September 14, 2009 11:09am ETF BASIC NEWS NYSE:UNG

why“As we have pointed out before, without the means to grow in a contango market the fund is forced to shed positions at every roll to account for the incremental cost of the new futures it is forced to buy. Without new funds

 being invested, this would ultimately see the fund implode. Being about to roll, the (UNG) is now, however, in a position to open its doors to new money — delaying its implosion, by reinvesting into new futures and also evening out its massive NAV/price deviation,” Izabella Kaminska Reports From ft.com/alphaville.

“In other words, it has no choice. And while the deviation in its NAV/price may subside for the time being, unless the natural gas market suddenly reverses into massive backwardation there is no way investors will manage to recoup losses in the medium term,” Kaminska Reports.

Kaminska continues “What’s more, the fund itself states there is no longer any predictability to when it feels like being in an issuing cycle and when it doesn’t.” As the key par from their statement says:

Currently, UNG’s management believes that (UNG) will have the ability, under limited circumstances, to offer Creation Baskets as of the above-referenced date and meet its investment objective.  If UNG’s management determines prior to the above referenced date that new circumstances have arisen that will prevent (UNG) from offering Creation Baskets, it will announce through a Form 8-K such changes in circumstances as soon as practicable.

Full Story: HERE

Chart for United States Natural Gas (UNG)


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