- Davide Accomazzo, MBA
The telegraphed day of reckoning has finally arrived and many commodity exchange-traded funds (ETFs) and exchange-traded notes (ETNs) are now finding themselves in the regulatory line of fire.
I have been on the record with my MBA students and with many of my colleagues in the investment business for quite some time regarding the multitude of problems associated with commodity ETFs. Finally, it seems corrective actions are being taken.
Just recently, UNG, the ETF that attempts to track natural gas futures’ performance, was subject to massive price distortions. UNG built a premium into its price versus its net asset value (NAV) of as much as 20% due to large inflows of money, which, ultimately, reflected investors’ bottom fishing. UNG was suddenly unable to expand its position due to an abrupt fear of breaching position limits in the futures pit.
The lesson learned? When an ETF cannot deliver on its strategy because of regulatory fear, the model is pretty much broken. Continue reading ‘Welcome to a New “Normal” in Commodities?’
