United States 12 Month Natural Gas Fund, LP (UNL) 2025 Annual Report: Key Insights for Investors

Executive Summary

The United States 12 Month Natural Gas Fund, LP (“UNL”) has released its 2025 annual report, providing comprehensive updates on its operations, financial condition, and risk landscape. The fund, which trades on the NYSE Arca under the symbol “UNL,” is designed to track the daily percentage changes in the average of the prices of the 12 nearest-month NYMEX natural gas futures contracts. The report contains several updates and disclosures that investors should pay close attention to, as they may have a direct impact on UNL’s share value and future performance.

Key Points from the Annual Report

• Fund Objective and Tracking: UNL aims to track the daily changes in the average price of 12-month natural gas futures contracts, not the spot price of natural gas or any single futures contract. Daily arbitrage opportunities are expected to keep the fund price closely aligned with its Net Asset Value (NAV), but over periods longer than one day, factors such as contango and backwardation can cause deviations from the underlying benchmark’s performance.
• Market Environment and Risks:
  • Natural gas prices remain highly volatile, affected by supply and demand dynamics, natural disasters, public health events (e.g., pandemics), and international conflicts, all of which can materially impact UNL’s NAV and share price.
  • UNL highlights the risk that price volatility could result in significant or total capital loss for investors.
  • Tracking error risks are present due to exchange-imposed accountability levels, position limits, and FCM-imposed risk mitigation, which can prevent the fund from fully investing in benchmark contracts and lead to a divergence from benchmark performance.
• Legal and Regulatory Developments:
  • UNL’s FCM, RBC Capital, settled an SEC investigation in August 2024 for \$45 million related to business communications on unapproved channels. This is noteworthy as regulatory scrutiny and fines can affect counterparties’ stability and indirectly impact UNL’s operations and investor confidence.
  • RBC Capital also faced disciplinary action from FINRA for confirmation-related issues between 2010 and 2019, resulting in a \$500,000 fine. While RBC acts only as a clearing broker for UNL, ongoing legal or regulatory issues with service providers could present counterparty risk.
• Fees and Expenses:
  • UNL’s total expenses for 2025 (after waivers) were 0.98% annualized of average daily net assets.
  • The largest expense component is the management fee paid to USCF (the sponsor), at 0.72% annualized.
  • Portfolio brokerage commissions (mainly to RBC Capital) are approximately \$3.50 per buy or sell, totaling 0.03% annualized.
  • Other expenses (legal, audit, insurance, etc.) contributed 0.66% annualized before waivers.
• Fund Structure and Creation/Redemption:
  • UNL operates as an exchange-traded product (ETP) with authorized participants creating or redeeming shares in large blocks (“baskets”). The fund may adjust its share price via stock splits or reverse splits to maintain trading ranges convenient for investors, but such actions do not affect the fund’s net assets or proportional voting rights.
• Performance and Tracking:
  • UNL’s performance objective is met if, over any 30-day period, the average daily percentage change in NAV stays within ±10% of the average daily percentage change in the benchmark futures contracts. This means significant short-term deviations can occur, but the fund aims to keep longer-term deviations in check.
  • Investors are cautioned that UNL is not a proxy for the spot price of natural gas, and that the market price of shares can be greater or less than NAV.
• Taxation Risks:
  • UNL is structured as a partnership for tax purposes. Investors may be allocated taxable income or loss that does not match their economic gain or loss. Items of income, deduction, and credit could be reallocated if the IRS does not accept UNL’s methods, potentially leading to adverse consequences for investors.
  • Non-U.S. shareholders may trigger withholding taxes, which could be borne by all shareholders.

Investor Alerts and Price-Sensitive Disclosures

• Legal/Regulatory Risks: The regulatory issues faced by RBC Capital, including a \$45 million SEC settlement and a \$500,000 FINRA fine, could raise counterparty risk concerns, especially if such events were to escalate or impact RBC’s capacity to act as FCM for UNL. While UNL states no direct conflicts of interest with RBC, investors should monitor for any further developments that could affect fund operations or liquidity.
• Expense Management: UNL’s total expenses, after waivers, were 0.98% of average daily net assets, which is significant for a fund of its type and may affect net returns, especially in periods of low or negative natural gas price changes.
• Potential for Tracking Error: Regulatory-imposed position limits, risk controls by FCMs, or market conditions could force UNL to invest in non-benchmark instruments, increasing tracking error and possibly reducing correlation with benchmark futures or spot prices. This is a key risk for investors seeking direct exposure to natural gas prices.

Additional Details

• Fund Size and Liquidity: As of June 30, 2025, the aggregate market value of UNL shares held by non-affiliates was \$12.2 million. The fund had 2.1 million shares outstanding as of February 23, 2026.
• Service Providers: RBC Capital, Marex Capital Markets, ADM Investor Services, and MFUSA serve as FCMs, with RBC Capital as the primary clearing broker. ALPS Distributors is the fund’s marketing agent, and BNY Mellon provides administration, custody, and accounting services.
• Fund Governance: UNL is managed by USCF, which handles credit risk evaluation, investment management, and oversight of authorized participants. The fund is not a “well-known seasoned issuer” and is classified as a non-accelerated filer and smaller reporting company.

Conclusion

UNL’s 2025 annual report presents a comprehensive picture of the fund’s structure, risks, and current state. The most price-sensitive developments relate to regulatory actions involving key service providers and the potential for tracking error due to regulatory and market constraints. Investors should monitor the fund’s ability to track its benchmark, manage expenses, and avoid counterparty disruptions, as these factors could materially affect share value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with a financial advisor before making investment decisions. Past performance is no guarantee of future results. All investments carry risk, including loss of principal.

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