10-K: United States Gasoline Fund, LP Files 10-K Report for Fiscal Year 2023

United States Gasoline Fund, LP (UGA) released its annual report on Form 10-K for the fiscal year ended December 31, 2023, detailing its financial performance and operational activities.

Summary

• The United States Gasoline Fund, LP (UGA) is a commodity pool that aims to track the daily percentage changes in the spot price of gasoline.
• UGA achieves this by investing primarily in gasoline futures contracts and other related investments.
• The fund's performance is influenced by factors such as contango and backwardation in the futures market, which can cause its returns to differ from the spot price of gasoline.
• For the year ended December 31, 2023, UGA's per share NAV increased by approximately 1.49%, closing at $60.64.
• The fund's average daily total net assets were approximately $75.1 million, and it earned $3.4 million in dividend and interest income.
• UGA's management fee is 0.60% per annum on its average daily total net assets.
• The fund's total expenses, including management fees, brokerage commissions, and other costs, were approximately $12.1 million, with $2.4 million waived by USCF.
• UGA's investment strategy is designed to track the Benchmark Futures Contract, and it aims to keep the average daily percentage change in its NAV within plus or minus 10% of the average daily change in the price of the Benchmark Futures Contract over a 30-day period.
• The fund's ability to track its benchmark can be affected by factors such as market disruptions, position limits, and risk mitigation measures imposed by FCMs.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing factual information about the fund's performance and operations. While there are risks associated with investing in UGA, the document does not express a positive or negative outlook.

Positives

• UGA's per share NAV increased during the year.
• The fund earned a significant amount of dividend and interest income.
• UGA did not exceed accountability levels on the NYMEX or ICE Futures.
• The fund's actual total return outperformed its benchmark by 3.35% for the year.

Negatives

• The fund's performance can be impacted by contango and backwardation in the futures market.
• UGA's ability to track its benchmark can be affected by market disruptions, position limits, and risk mitigation measures imposed by FCMs.
• The fund's expenses, including management fees and brokerage commissions, can impact its returns.
• The fund is subject to credit risk with respect to counterparties to OTC contracts.

Risks

• Fluctuations in gasoline prices can materially affect an investment in UGA.
• The fund's performance may not correlate with the spot price of gasoline.
• Natural forces in the gasoline futures market, such as backwardation and contango, can impact total return.
• Accountability levels, position limits, and daily price fluctuation limits set by exchanges can cause tracking error.
• Risk mitigation measures imposed by FCMs can limit UGA's investments.
• An investor's tax liability may exceed the amount of distributions.
• UGA is subject to credit risk with respect to counterparties to OTC contracts.
• The fund could become leveraged if it has insufficient assets to meet margin requirements.
• Infectious disease outbreaks like COVID-19 could negatively affect the valuation and performance of UGAs investments.
• UGA may not meet the listing standards of NYSE Arca, which could adversely impact an investors ability to sell shares.
• The failure or bankruptcy of a clearing broker or custodian could result in a substantial loss of UGAs assets.
• Cyber-attacks pose operational and information security risks.
• UGAs investment returns could be negatively affected by climate change and greenhouse gas restrictions.

Future Outlook

UGA intends to continue to pursue its investment objective as described in the document, and USCF believes that the daily changes in percentage terms of UGA's NAV will continue to closely track the daily changes in percentage terms in the price of the Benchmark Futures Contract.

Management Comments

• USCF believes that market arbitrage opportunities will cause daily changes in UGA's share price on the NYSE Arca on a percentage basis to closely track daily changes in UGA's per share NAV on a percentage basis.
• USCF further believes that daily changes in prices of the Benchmark Futures Contract have historically closely tracked the daily changes in spot prices of gasoline.
• USCF believes that the net effect of these relationships will be that the daily changes in the price of UGA's shares on the NYSE Arca on a percentage basis will closely track, the daily changes in the spot price of gasoline on a percentage basis, plus interest earned on UGA's collateral holdings, less UGA's expenses.

Industry Context

This announcement is related to the broader trend of investors seeking exposure to commodity markets through exchange-traded products. UGA provides a way for investors to gain exposure to the gasoline market without directly owning physical gasoline or trading futures contracts themselves. The fund's performance is influenced by the volatility of the gasoline market and the dynamics of the futures market.

Comparison to Industry Standards

• UGA's expense ratio of 0.87% is within the range of similar commodity-tracking exchange-traded products.
• The fund's tracking error, as measured by the difference between its NAV and the Benchmark Futures Contract, is generally within its target range of plus or minus 10% over a 30-day period.
• Compared to other commodity ETFs, UGA's performance is highly correlated with the price of gasoline futures contracts.
• The fund's use of multiple FCMs is a common practice to mitigate counterparty risk.

Legal Proceedings

• USCF and USO were named as defendants in an action filed by Optimum Strategies Fund I, LP, which was dismissed by the court.
• USCF and USO reached a settlement with the SEC and CFTC relating to matters set forth in certain Wells Notices.
• USCF, USO, and certain individuals are subject to class action litigation, In re: United States Oil Fund, LP Securities Litigation, which they intend to vigorously contest.
• USCF, USO, and certain individuals are subject to a derivative action, Mehan Action, which is stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
• USCF, USO, and certain individuals are subject to a derivative action, In re United States Oil Fund, LP Derivative Litigation, which is stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.

Related Party Transactions

• UGA pays USCF a management fee of 0.60% per annum on its average daily total net assets.
• USCF pays the fees of the Marketing Agent and BNY Mellon for their services.
• UGA pays a licensing fee to the NYMEX.
• UGA pays a portion of the fees and expenses of the independent directors of USCF.

Stakeholder Impact

• Shareholders are exposed to the risks associated with investing in gasoline futures contracts.
• Authorized Participants are responsible for the creation and redemption of shares.
• USCF is responsible for managing the fund and ensuring it meets its investment objective.
• FCMs provide brokerage services and are responsible for safeguarding UGA's assets.

Next Steps

• UGA intends to continue to pursue its investment objective as described in the document.
• USCF will continue to monitor the fund's performance and make adjustments as necessary to meet its investment objective.

Key Dates

Keywords

gasoline, futures contracts, commodity pool, RBOB, NYMEX, ICE Futures, NAV, contango, backwardation, USCF, tracking error, OTC swaps, position limits, FCM, market risk