ETRACS Natural Gas Futures Contango ETN (GASZ), linked to the ISE Natural Gas Futures Spread Index , reported a return of 19.62% for the six-month period ending on 30 April, 2012.
According to Bloomberg data, the ETRACS Natural Gas Futures Contango ETN has significantly outperformed the leading natural gas ETF, the United States Natural Gas Fund (Ticker: UNG), year-to-date, during the six-month period ending on 30 April, 2012 and since the first day that both products could be purchased on an exchange.
GASZ is designed to capitalise 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.
As an ETN, GASZ also benefits from the elimination of index tracking error and avoids the tax administration burden associated with K-1 forms1. However, ETRACS ETNs are subject to investor fees, and therefore, the return on the ETNs will always be less than the return on a direct investment in the Index.