First Trust Natural Gas ETF (FCG): A 5-Year Performance Analysis

The First Trust Natural Gas ETF (FCG) has been a subject of interest for investors seeking exposure to the natural gas sector. As the energy landscape evolves, it is essential to assess the performance of FCG over the past five years to determine if it is the best-performing ETF in its category. This article will delve into the factors contributing to FCG's performance, compare it to other energy ETFs, and analyze the role of sector concentration in its performance.

FCG's performance over the last five years has been influenced by several factors, including the price of natural gas, the performance of its constituent companies, and the ETF's expense ratio. According to the provided data, FCG has an annualized return of 26.16% over the past 5 years, which is higher than the average return of other ETFs in the energy sector.

One of the key factors contributing to FCG's performance is the price of natural gas. As a natural gas-focused ETF, FCG's performance is closely tied to the price movements of natural gas. Over the past 5 years, natural gas prices have experienced periods of volatility, with prices reaching a low of $1.61 per MMBtu in March 2020 and a high of $9.12 per MMBtu in August 2022. These price fluctuations have impacted FCG's performance, as the ETF is designed to track the equity performance of companies involved in the exploration and production of natural gas.

Another factor contributing to FCG's performance is the performance of its constituent companies. FCG's portfolio consists of various well-known companies within the natural gas sector, such as Cabot Oil & Gas (COG), Devon Energy (DVN), and Range Resources (RRC). The performance of these companies, driven by factors such as operational efficiency, reserve replacement, and financial health, has a direct impact on FCG's overall performance.

Lastly, FCG's expense ratio has also played a role in its performance. With an expense ratio of 0.60%, FCG is relatively low compared to other sector-specific ETFs. This lower fee structure makes FCG more cost-effective for long-term investors, allowing them to retain more of their returns over time.



In comparison to other ETFs in the energy sector, FCG's performance has been relatively strong. For instance, the Energy Select Sector SPDR Fund (XLE), which tracks the performance of the Energy Select Sector Index, has an annualized return of 15.97% over the past 5 years. While XLE's performance is still positive, it is lower than FCG's return of 26.16%. This comparison highlights the potential of FCG as a strong performer in the energy sector, driven by its focus on natural gas and the specific factors mentioned above.

FCG's sector concentration in natural gas has played a significant role in its performance, both positively and negatively. On one hand, the ETF's focus on natural gas has allowed it to capitalize on the growing demand for this commodity, particularly in emerging markets, as it serves as a bridge fuel in the transition to renewable energy. This focus has contributed to FCG's performance, as seen in its 5-year annualized return of 26.16% (as of February 22, 2025).

However, FCG's sector concentration also exposes it to higher risk. Natural gas prices are notoriously volatile, influenced by factors such as geopolitical events, weather patterns, and regulatory changes. This volatility can translate to substantial price swings in the ETF, making it a riskier option for conservative investors. For instance, in the year-to-date period (as of February 22, 2025), FCG has experienced a maximum drawdown of -79.00%, indicating significant price fluctuations.

In conclusion, FCG's sector concentration in natural gas has contributed to its performance by allowing it to capitalize on the growing demand for this commodity. However, this concentration also exposes the ETF to higher risk and volatility. In comparison, more diversified energy ETFs like XLE may offer a smoother ride and better long-term performance, but they may not provide the same level of exposure to the natural gas market. Investors should carefully consider their risk tolerance and investment goals when deciding whether to invest in FCG or other energy ETFs.