Credit: Shutterstock photoBy Drew Voros
ETF.com Editor-in-Chief
With nearly half of 2016 over, the theme for this year in the ETF industry is golden with a silver lining. That’s because the best-performing ETFs of the year and the most popular funds are all related to gold and silver.
The top 10 performing ETFs through May 31 are gold ETFs and silver miner ETFs, which are equity funds comprising gold and silver mining companies. The PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF (SILJ) is the best-performing fund so far in 2016 with 130.97% returns since the beginning of the year. The Global X Gold Explorers ETF (GLDX) trails in second place by a gap, but it has seen a healthy 87.4% return. Similar to SILJ, GLDX focuses on gold explorers, which are typically small firms involved in the earliest stages of the business. The other eight top performers also are either gold or silver miner ETFs.
At the bottom of the performance barrel, there is a more diverse group of ETFs as well as exchange-traded notes.
The iPath Bloomberg Natural Gas Subindex Total Return ETN (GAZ) is the worst-performing exchange-traded product of the year, with a loss of 45.8% year-to-date. GAZ’s performance does have some correlation to natural gas prices, but it is really more that it’s a prime example of a broken product. Back in 2009, the issuer—Barclays—suspended issuances of the exchange-traded note, throwing a wrench into the process that normally keeps ETNs close to their net asset value.
In turn, GAZ would go on to often trade at sizable premiums to its NAV, with no rhyme or reason to its fluctuations. The ETN still holds some correlation to natural gas prices―which are down this year―but it's a product most investors should stay away from.
The rest of the loss leaders range from volatility products like the AccuShares Spot CBOE VIX Up Shares (VXUP), down 31%, to the two solar ETFs on the market, the Guggenheim Solar ETF (TAN), which is down 28%, and the VanEck Vectors Solar Energy ETF (KWT), which is down 25%. Here is a list of the 10 worst-performing ETFs of the year:
Best/Worst Inflows & Outflows
When it comes to asset-gathering, gold again is atop the leader board, but rather than a gold miner ETF, it’s the physically backed gold fund SPDR Gold Trust (GLD) that has attracted $8.8 billion in net inflows in the January-to-May period as investors cool to stocks and risk. In a similar risk-off vein, the iShares Edge MSCI Min Vol USA ETF (USMV) has taken in more than $5.3 billion in five months, according to FactSet data.
The biggest asset losers came from currency-hedged ETFs, the once-hot and successful trade that has cooled as the dollar has fallen. The WisdomTree Japan Hedged Equity Fund (DXJ) and the WisdomTree Europe Hedged Equity Fund (HEDJ) were among the least popular funds in the first five months, losing $4.2 billion and $3.8 billion, respectively. These numbers stand in stark contrast to the massive inflows both funds saw in 2015: HEDJ attracted nearly $14 billion, and DXJ saw $3.7 billion last year.
What’s interesting is their unhedged counterparts also fell out of favor with investors, as the iShares MSCI Japan ETF (EWJ) and the iShares MSCI Eurozone ETF (EZU) saw redemptions of $3.7 billion and $3.5 billion, respectively, in the same period.
Launches
State Street Global Advisors launched a fund-of-funds ETF based on a Dorsey, Wright index, similar to ETFs launched recently by PowerShares and First Trust. The SPDR Dorsey Wright Fixed Income Allocation ETF (DWFI) will invest in four funds from a roster of some 20 fixed-income SPDRs, weekly selecting its ETF components based on their relative strength compared with the rest of the selection universe. The new fund comes with an expense ratio of 0.60%.
Relative strength is used by Dorsey, Wright & Associates in its proprietary methodologies to measure the price momentum of individual securities relative to the price momentum of the other securities within a group.
Also launching last week was Franklin Templeton’s first foray into smart-beta ETFs. The Franklin LibertyQ International Equity Hedged ETF (FLQH) employs quality, value, momentum and low-volatility factors, as well as being currency-hedged. Its components are drawn from the MSCI EAFE Index, and it has an expense ratio of 0.40%. Also launched were the Franklin LibertyQ Emerging Markets ETF (FLQE), with a 0.55% expense ratio, and the Franklin LibertyQ Global Equity ETF (FLQG), which has an expense ratio 0.35%. Like FLQH, they target the quality, value, momentum and low-volatility factors, but they do not come with a currency hedge.
The fourth Franklin fund that launched is singularly focused on quality. The Franklin LibertyQ Global Dividend ETF (FLQD) has an expense ratio of 0.45%. The fund’s index is derived from the MSCI ACWI ex REITs Index, with screens applied to highlight stocks with dividend persistence and yield growth, with components selected from the remaining universe based on their exposure to the quality factor, the prospectus said.
Drew Voros can be reached at dvoros@etf.com.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
