US Natural Gas Fund To Resume Issuing New Shares - Filing
September 11 2009 - 6:08PM
Dow Jones News
United States Natural Gas Fund LP (UNG) will resume issuing new
shares starting Sept. 28, the fund said in a filing with the
Securities and Exchange Commission.
On Aug. 12, the fund said it would stop issuing shares, citing
fears that the Commodity Futures Trading Commission would set new
position limits on energy trading. Since then, the fund has engaged
in over-the-counter transactions known as swaps to bring the
exchange position under any potential limits.
UNG and other exchange-traded funds, or ETFs, sell shares on
stock exchanges, then use the investment to buy futures contracts.
Commodity ETFs have grown enormously over the last three years,
with UNG seeing particularly rapid growth in 2009. The fund saw
$4.6 billion in net inflows through August, according to the
National Stock Exchange.
Regulators and lawmakers in Congress have said they are
concerned that ETFs that solely take positions betting that
commodity futures will rise, including UNG, have artificially
inflated prices.
Other ETFs and similar products known as exchange-traded notes
have also suspended issuances, including Barclays PLC's (BCS) iPath
Dow Jones-UBS Natural Gas Subindex Total Return ETN (GAZ). In
August, Deutsche Bank AG (DB) said it would close its PowerShares
DB Crude Oil Double Long (DXO) ETN.
UNG shares are trading at a 15% premium to the value of the
underlying natural gas contracts, as investor interest in the fund
has remained strong since the share issuances stopped. That premium
is now in jeopardy.
"It is possible that the resumption of creation activity, even
on a limited basis, could reduce or remove any premium," the fund
said in the filing. "Investors are cautioned that paying a
premium...for UNG units can lead to additional losses for the
investor in the event that the investor sells such units at a time
when the premium is no longer present in the market price."
-By Brian Baskin, Dow Jones Newswires; 212-416-2453;
brian.baskin@dowjones.com