Investors, nonetheless, have piled into the fund. Net deposits have totaled more than $3 billion this month amid heavy losses, Refinitiv data shows. Individual investors are in a battle with hedge funds, which are using short positions to bet on further declines in the fund.
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Nearly 50 U.S. money managers and wealth advisers reported holding small amounts of USO shares for clients at the end of March, SEC disclosures show. The trust division at Chicago-based First Midwest Bank, for example, reported holding about 64,000 shares for investors at the end of the first quarter.
Meanwhile, short interest in USO is about $94 million, up about 1 per cent in the past week, according to analyst Ihor Dusaniwsky at S3 Partners LLC.
Analysts have questioned whether USO is an appropriate investment for retail investors, given that it makes concentrated bets on complex futures contracts. Individual investors, however, are filling a void left by pension funds, Colorado-based energy analyst Phil Verleger of PK Verleger LLC said in a research note this week.
"A drop-off in pension fund investing left many commodity futures markets to stagnate. Oil, though, continued to expand as individual investors stepped in for pension funds," Verleger wrote in his note.
USO is now recasting its investment strategy. It is selling its position in front-month June crude futures contracts, and has been diversifying into later-dated contracts to avoid a repeat of last week's panic.
On Wednesday, a previously announced reverse stock split went into effect, reducing outstanding shares to 185 million from about 1.5 billion. The move was designed to add liquidity while protecting shares from delisting.
Shares had been trading around $2 and risked being delisted if they fell below $1. Post-split shares were up about 6 per cent at $18 on Wednesday, but they are still down about 80 per cent this year.