One year after the release of its ground-breaking exchange-traded security for following the crude oil market, Victoria Bay Asset Management has launched a vehicle for tracking the natural gas market.
The United States Natural Gas Fund
, an exchange-traded security based on natural gas, launched on the American Stock Exchange Wednesday at $50 a share.
In a written statement, the California-based asset manager said the fund isn't operated to have its net asset value perfectly track changes in the dollar price of spot natural gas or any particular futures contract. Rather, the fund expects its price to reflect the daily percentage change in the price of natural gas delivered at Henry Hub, La.
The fund has an expense ratio of 0.6%. Brokerage costs for the trading of futures contracts isn't included in the expense ratio.
Strictly speaking, the Natural Gas Fund isn't an exchange-traded fund. ETFs hold securities and track indexes that measure the movement of stocks or bonds. Rather, this fund is structured as a commodity pool managed by Victoria Bay. Because of this, the fund is not registered as a mutual fund under the Investment Company Act of 1940, nor is it subject to its rules. The 1940 law regulates the operation of mutual funds and ETFs.
The NAV will be determined by the performance of a basket of futures contracts for natural gas listed on the New York Mercantile Exchange.
"UNG intends to invest primarily in those futures contracts that are in the two months closest to expiration because we feel those contracts will permit the fund to best achieve its investment objective," said John Hyland, the fund's portfolio manager in a written statement. He added that the partnership "does not seek to use leverage in the portfolio to achieve its investment goals."
The United States Oil Fund
launched April 10, 2006. It currently has assets of about $800 million.