Embrace Volatility with the VXX, the New UNG

Searching for the next United States Natural Gas Fund, LP (NYSE:UNG)?  Take a bet on volatility with the iPath S&P 500 VIX Short Term F (NYSE:VXX) which is similar to the UNG in several ways; both products have seen waves of cash inflows despite delivering disappointing share price
performances.

(M Johnston | ETFdb.com) One of the most interesting success stories in the ETF industry is that of the United States Natural Gas Fund (UNG). After a moderately
successful first 18 months that saw assets climb above $700 million, interest in natural gas as an investment surged in 2009 amidst big dropsin prices, political pushes to reduce dependence on foreign oil, and dreams of widespread adoption of natural gas-powered cars.

In 2009, cash inflows to UNG totaled nearly $5.6 billion, and fund assets grew by more than 600%. Unfortunately for the investors responsible for this growth, UNG was also one of the worst-performing ETFs of 2009, losing more than half of its value despite little annual change in spot natural gas prices. Although interest in UNG has waned in recent months, it remains one of the largest exchange-traded commodity products and a major holder of natural gas futures contracts (see Six Reasons UNG Is Due For A Comeback).

Another of the most innovative exchange-traded products brought to market in recent years is the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which offers exposure to equity market volatility through futures contracts. While the asset class exposure is very different, VXX is very similar to UNG in several ways; both products have seen waves of cash inflows despite delivering disappointing share price performances.

Since its inception in January 2009, VXX has seen cash inflows of approximately $2 billion, including more than $800 million in the first quarter of 2010. But VXX’s assets at the end of the first quarter totaled just $1.2 billion, the result of a woeful share price performance over the last year and a quarter. Since its launch, VXX has lost more than 80% of its value, making it the worst-performing non-leveraged and non-inverse ETF over that period.

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SOURCEs: http://seekingalpha.com/article/200056-vxx-the-new-ung

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