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Leveraged gas ETC shares plunge by 90%

Shares in an ETF Securities leveraged natural gas exchange traded commodity have lost 90 per cent of value in 18 months while the price of gas has remained static.

Shares of the £248m ETF Securities leveraged natural gas closed at $4.09 on May 11, 2009 but as of Tuesday, they were trading at $0.41, in a period where gas spot prices have remained around $4. Morningstar has cut its ratings on leveraged and short ETFs, saying they are for traders and not long-term investors.

ETF Securities director of third-party distribution Neil Jamieson says the ETC, which returns 200 per cent of the daily change of the DJ-UBS natural gas sub-index, does not track spot prices so there is exposure to a futures curve.

The daily profit and loss rebalancing on the fund can also lead to losses or gains, even if the commodity stays fixed.

Jamieson says: “Normally speaking, because of the way the products work, you should go in with a short-term view and then close out your position.”

The ETC closed at $87.83 on July 4, 2008, meaning investors who bought in then made a loss of 99.5 per cent this week if they held on to shares.

Hargreaves Lansdown investment manager Ben Yearsley says: “Retail investors should treat all leveraged ETFs and investments with caution.”

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  1. Just to provide a little balance, had you invested in ETFS Short Natural Gas from 04/07/08 to 01/12/10 you would have made a tidy 435% in US$ terms, 581% in sterling terms.

    I don’t work for ETFS by the way!

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