Disclosure
BNO’s Investments in Crude Oil Interests
An investment in the units issued by United States Brent Oil Fund, LP ("USBO") involves risks. These risks can significantly impact the market value of the units. Some of the risks you may face are summarized below.
- USBO is not a registered investment company so unitholders do not have the protections afforded by the Investment Company Act of 1940.
- Unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USBO generally does not expect to distribute cash to limited partners.
- Investing in Crude Oil Interests subjects USBO to the risks of the crude oil industry and this could result in large fluctuations in the price of USBO’s units.
- Changes in USBO’s Net Asset Value (NAV) may not correlate with changes in the price of the Benchmark Futures Contract. If this were to occur, investors may not be able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.
- The Benchmark Futures Contract may not correlate with the spot price of Brent crude oil and this could cause the changes in the price of the units to substantially vary from the changes in the spot price of Brent crude oil. If this were to occur, then investors may not be able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.
- If USCF causes or permits USBO to become leveraged, you could lose all or substantially all of your investment if USBO's trading positions suddenly turned unprofitable
- An unanticipated number of redemption requests during a short period of time could have an adverse effect on the NAV of USBO.
- USBO engages in the trading of futures contracts and options on futures contracts and may engage in cleared swaps (collectively, “derivatives”). USBO is exposed to both market risk, which is the risk arising from changes in the market value of the contracts, and credit risk, which is the risk of failure by another party to perform according to the terms of a contract.
- There is a risk that USBO will not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such USBO may not earn any profit.
- Futures contracts and cleared swaps involve, to varying degrees, elements of market risk (specifically commodity price risk) and exposure to loss in excess of the amount of variation margin
- USBO’s exposure to market risk depends on a number of factors, including the markets for oil, the volatility of interest rates and foreign exchange rates, the liquidity of the Futures Contracts and Other Crude Oil-Related Investments markets and the relationships among the contracts held by USBO.
- Risks associated with the use of futures contracts are an imperfect correlation between movements in the price of the futures contracts and the market value of the underlying securities and the possibility of an illiquid market for a futures contract.
- USBO has credit risk under its futures contracts since the sole counterparty to all domestic and foreign futures contracts is the clearinghouse for the exchange on which the relevant contracts are traded. In addition, USBO bears the risk of financial failure by the clearing broker.
- USCF invests primarily in Futures Contracts, a significant portion of which are traded on exchanges outside of the United States, including the ICE Futures. Some non-U.S. markets present risks because they are not subject to the same degree of regulation as their U.S. counterparts.
- International trading activities subject USBO to foreign exchange risk.
- In the future, USBO may purchase over-the-counter contracts (“OTC Contracts”). Unlike most exchange-traded futures contracts or exchange-traded options on such futures, each party to an OTC Contract bears the credit risk that the other party may not be able to perform its obligations under its contract.
- Certain of USBO’s investments could be illiquid which could cause large losses to investors at any time or from time to time.
- SCF invests a portion of USBO’s cash in money market funds that seek to maintain a stable net asset value. USBO is exposed to any risk of loss associated with an investment in these money market funds.
- The vast majority of USBO’s assets are held in Treasuries, cash and/or cash equivalents with USBO’s custodian. The insolvency of the custodian could result in a complete loss of USBO’s assets held by that custodian, which, at any given time, would likely comprise a substantial portion of USBO’s total assets.
- Regulation of the commodity interests and energy markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and adversely affect USBO
- Trading on non-U.S. exchanges is often in the currency of the exchange’s home jurisdiction. Consequently, USBO is subject to the additional risk of fluctuations in the exchange rate between such currencies and U.S. dollars and the possibility that exchange controls could be imposed in the future. The Benchmark Futures Contract, however, is traded in U.S. dollars and does not expose USBO to the risk of currency fluctuations.
- Trading on non-U.S. exchanges may differ from trading on U.S. exchanges in a variety of ways and, accordingly, may subject USBO to additional risks.
- Trading in the interbank market also exposes USBO to a risk of default since failure of a bank with which USBO had entered into a forward contract would likely result in a default and thus possibly substantial losses to USBO.
- USCF is leanly staffed and relies heavily on key personnel to manage trading activities.
- USCF’s trading system is quantitative in nature and it is possible that USCF might make a mathematical error.
- USBO may experience substantial losses on transactions if the computer or communications system fails.
- USBO and USCF may have conflicts of interest, which may permit them to favor their own interests to the detriment of unitholders.
- USCF may manage a large amount of assets and this could affect USBO’s ability to trade profitably.
- The success of USBO depends on the ability of USCF to accurately implement trading systems, and any failure to do so could subject USBO to losses on such transactions.
- USBO could terminate at any time and cause the liquidation and potential loss of an investor’s investment and could upset the overall maturity and timing of an investor’s investment portfolio.
*Some risks listed above may be mitigated due to rules proposed by the CFTC and SEC as promulgated under the Dodd-Frank Act. For a discussion of these risks and others, please see the current Prospectus .