UNG
United States Natural Gas Fund
Published by Radif Partners · Updated
Overview
United States Natural Gas Fund (UNG) tracks the Henry Hub Natural Gas Futures index synthetically, through a swap agreement rather than by holding the constituents, and is managed by US Commodity Funds. Dividends are paid out to holders rather than reinvested, so UNG suits investors seeking regular income. The fund is domiciled in US, which determines the withholding tax treatment applied to its dividends. Annual charges come to 1.06% of assets, and the fund holds 458M under management. Over five years the fund returned -32.0% a year on average, against -26.8% over three years. It is not eligible for the French PEA, but can be held in a securities account, a UK ISA or a German Depot. Its risk level is rated high. Launched on 2007-04-18, the fund is denominated in USD and has 19 years of track record. Because UNG distributes, every payment is taxable in the year it is received, against the dividend allowance in a general account, while it stays sheltered inside an ISA or a SIPP. Domicile in US sets the withholding the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return.
At 1.06%, this fund costs more than twice the median of its category (0.30%) and over 11.8 times the cheapest (0.09%). On £10,000 the gap to the median is worth about 760 over ten years, and that difference is certain in a way no performance gap is. A premium can be justified, by an index no competitor tracks, by a useful trading currency, or by size that guarantees liquidity; it is not justified by the brand. The question is therefore plain: what does this fund offer that the cheapest on the list does not?
This fund tracks Henry Hub Natural Gas Futures through a swap: it does not hold the index constituents but a collateral basket, and exchanges that basket's return for the index's with a bank. Two consequences are real. It introduces counterparty risk, bounded by collateral revalued daily and by regulation, but not zero. And it makes possible what direct holding cannot: tracking an index closed to direct purchase, or avoiding withholding tax on dividends, which is why a synthetic fund sometimes beats its physical twin after tax. The swap's cost does not appear in the ongoing charge; it shows up in tracking difference measured over several years.
The fund is domiciled in the United States, and for a European investor that is the point to settle before any other. A US fund is outside UCITS regulation: most European brokers cannot offer it to a retail client for want of a key information document, so access depends on the investor's status. Two tax consequences follow as well: dividends paid to a non-resident bear US withholding, reduced by treaty where a W-8BEN is in place, and US securities held directly fall within US estate tax above a threshold that is low for a non-resident. An Irish-domiciled equivalent avoids both questions.
Income is distributed: the fund pays out the dividends it receives, usually one to four times a year. For a holder living off the portfolio that is what is wanted, since the income arrives without selling. For someone still accumulating it is a tax disadvantage in a taxable account: each payment is taxed in the year received, so the amount reinvested is reduced before it starts working again. Reinvesting by hand also costs a dealing commission each time and often leaves cash idle for want of the price of a whole unit. An accumulating class on the same index, where one exists, settles the question.
With 458 million in assets and 19 years of history, this fund has the size and the record that make closure unlikely and the spread narrow. Three checks remain, once a year, none of which depends on the market. The ongoing charge, which an issuer revises without notice and whose gap to a competitor can invert. The tracking difference, the only figure that says whether replication stays faithful. And the methodology of Henry Hub Natural Gas Futures, which can change its selection or weighting rules without the fund's name moving, in which case what you hold has changed with nothing to announce it.
Henry Hub Natural Gas Futures is a broad index, and that is the building block most portfolios have reason to own before any other, for a simple reason: it requires no forecast. Two points deserve checking before calling it diversified. Cap weighting concentrates the portfolio on the largest companies, so the top ten holdings can make up a substantial share, and that concentration grows without any rule changing. And the geographic scope matters: a developed-world index leaves out emerging markets, while a broad US index is not global exposure despite the international revenue of the companies it holds.
Over one year the fund shows -17.8% against -32.0% annualised over five years: the recent year sits well above the long average. A gap in that direction mainly counsels care about the entry point, since what has risen sharply lately costs more today than a year ago, and the long average is the figure that best describes what to expect.
1.06%
458M
458M USDHigh
20
Synthetic
Distributing
USD
US
Henry Hub Natural Gas Futures
US Commodity Funds
2007-04-18 (19 years)
Contextual Analysis
Fund Size
With 458M in assets, this is a mid-sized fund, decent liquidity for most investors.
Fee Positioning
A TER of 1.06% is above the market average (~0.35%), justified if the strategy is specialized.
Track Record
Launched in 2007-04-18, this fund has 19 years of history, long and reliable track record.
Risk Profile
High risk, suited for long-term investors comfortable with volatility.
Performance
Returns Summary
| Period | Ann. Return | Cumulative |
|---|---|---|
| 1 Month (est.) | – | -1.6% |
| 3 Months (est.) | – | -4.8% |
| 6 Months (est.) | – | -9.3% |
| YTD (est.) | – | -7.8% |
| 1 Year | -17.8% | -17.8% |
| 3 Years | -26.8% | -60.7% |
| 5 Years | -32.0% | -85.5% |
| Since inception (19y) | -25.5% | -99.6% |
Key Facts
Fund Profile
Themes & Zones
Holdings
Risk
How to Buy This ETF
Select your country in the menu to see available brokers and wrappers.
About this ETF
The United States Natural Gas Fund tracks the Henry Hub Natural Gas Futures index. It is managed by US Commodity Funds using synthetic replication and follows a distributing distribution policy. The fund is denominated in USD and domiciled in US. It has a total expense ratio (TER) of 1.06%.
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Frequently asked questions
What do UNG's 1.06% charges actually cost?
They are taken from the fund's value continuously and never billed separately: on £1,000 invested that is about £10.60 a year and roughly £106 over ten years at a constant amount. That is the only cost of the fund itself. Your broker's commission and the spread between buying and selling price come on top, and they weigh most on small frequent purchases.
Does UNG pay dividends?
Yes: the fund distributes and pays out the dividends it receives, on a calendar set by US Commodity Funds. The payment is taxable in the year you receive it in most accounts, even if reinvested at once, and reinvesting by hand costs a commission each time. An accumulating class on the same index avoids that friction for anyone who does not need the income.
What currency risk comes with UNG?
The fund is denominated in USD, but the trading currency is not the risk: what counts is the currency in which the companies held earn their revenue. A euro-based investor therefore carries the gap between the euro and those currencies, and that gap appears in no return published in local currency. A hedged share class answers a different question, at a cost that varies with the interest rate gap.
How do you buy UNG, and on which venue?
Through any broker that lists ISIN US9123181071. The same strategy often exists in several share classes with different fees and distribution policies, and what counts is the class you buy rather than the one you read about: check the ISIN, not the name. A limit order avoids paying the spread of a thin order book, particularly outside the trading hours of the underlying markets.
Is UNG genuinely diversified?
Less so than the number of holdings suggests. Henry Hub Natural Gas Futures weights its constituents by market capitalisation, so the largest companies make up a share of the fund far above their number, and that concentration deepens without any rule changing. The useful check is the weight of the top ten holdings, published monthly by US Commodity Funds: that figure says how many companies the outcome actually depends on.
This ranking is for informational purposes only and does not constitute a recommendation to buy or sell any security. Displayed performance is simulated.